AMF Headquarters, Abu Dhabi, UAE

Abu Dhabi (IINA) : The Arab Monetary Fund (AMF) on Wednesday released the April edition of “Arab Economic Outlook Report” including projections for macroeconomic performance for Arab countries in 2017 and 2018.

According to the AMF report, the economies of Arab petroleum exporting countries are expected to grow by 2.3 percent in 2017 and 2.7 percent in 2018, due to adjustment of crude oil production and fiscal consolidation measures which will affect the expected growth level this year.

The report indicated that oil markets are expected to witness a partial recovery in 2017 and 2018 in light of the Organization of the Petroleum Exporting Countries (OPEC) agreement to adjust oil production by 1.2 million barrel a day, and the non-OPEC oil production countries to adjust their output by 0.6 million barrel a day in the first half of 2017. The commitment to this agreement will help to bring the oil market balance in 2017. In the meantime, oil demand is expected to increase by 1.2 million barrel a day this year according to OPEC estimates.

These developments will support oil prices to increase in 2017 and 2018 compared to levels recorded in 2016 which reached 40.8 dollar/barrel for the OPEC price basket. However, the expected increase in shale oil production due to the price gains will limit the upward trend of oil prices during 2017 and 2018.

Regarding the economic growth in the Arab region, the report mentioned that the unfavorable global economic developments have impacted the macroeconomic performance of the Arab countries in light of the continuation of the sluggish recovery of the global economy, the outward of capital flows from developing and emerging markets economies, and the declining trend of oil prices. In addition, some Arab countries have been affected by internal conditions.

As for economic growth expectations for 2017, the report expects that the Arab economies will grow by 2.3 percent in 2017 as a result of the decline in the growth rate of the Arab oil-exporting countries to 1.8 percent in light of the decline of oil production reflecting the commitment of these countries to the OPEC agreement to adjust production quantities to balance the world oil markets. Additionally, the fiscal corrective measures and the anticipated increase in interest rates in a number of these countries will continue to affect the growth levels in non-oil sectors. Within this group, the growth rate of the Gulf Cooperation Council (GCC) countries is expected to reach 1.7 percent in 2017 compared to 1.9 percent in 2016, while the economies of the other Arab oil-exporting countries are expected to grow by 1.1 percent compared to 1.6 percent last year.

With regard to the growth forecast for 2018, the pace of economic activity in the Arab countries is expected to rise to 2.7 percent due to a number of positive factors driving growth. In oil-exporting countries, the growth rate is expected to rise to 2.3 percent in the light of the return of oil production to previous tracks and the anticipated increase in the global oil prices, albeit at a lower rate than expected this year. These countries will also benefit from the gradual fading of the impact of fiscal corrective measures on the aggregated demand levels. In addition, the growth in some countries within this group of countries will be supported by the relative improvement in the internal conditions.

On Inflation Expectations for 2017 and 2018, the report mentioned that inflation rates in Arab countries will be affected by some internal and external factors. On the internal level, the general price level will be impacted in some Arab countries by the continuation of reforms aiming at rationalizing subsidy systems, the adoption of the value-added taxes as well as the tendency towards imposing taxes on harmful goods.

Based on what has been mentioned, inflation rate in Arab countries in expected to reach 9.8 percent and 9.6 percent in 2017 and 2018 respectively.