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Wed 20 Jan 2010 04:20 PM

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UN predicts 3.6% growth in Arab world in 2010

United Nations report says oil price rebound, state spending will fuel recovery.

UN predicts 3.6% growth in Arab world in 2010
ECONOMIC GROWTH: The United Nations is predicting 3.6% growth for the Arab world in 2010. (Getty Images)

Most Arab countries are expected to record an average 3.6 percent economic growth this year as the price of crude oil rebounds from 2009, a United Nations economic report said on Wednesday.

The global credit crunch brought a boom in Gulf Arab economies to a halt last year but high state spending and a resurgence in oil prices have contributed to the recovery of the world's top oil exporting region.

Global oil prices had hit record highs above $145 a barrel in July 2008, but slipped to a low just above $32 a barrel during the peak of the global crisis.

"As the prices of crude oil currently rebounded to about $80 per barrel, the mood in the region is shifting from pessimism to measured optimism," said a press release about the full report, titled "World Economic Situation and Prospects 2010", launched in the Lebanese capital.

The first chapter was published in a December pre-release.

"...the surge in oil prices will also allow trade surpluses to increase again for oil exporting countries. However, non oil-exporting countries are likely to witness greater trade deficits," it said.

Abu Dhabi has already said it expected its economy to grow by up to 4 percent this year, Oman's finance minister said growth would reach 6.1 percent, and Saudi banks expect growth in the kingdom to sharply pick up to about 3.8 percent in 2010.

The report said economies in Western Asia, which include those of most Arab countries, had witnessed a 1.0 percent contraction in 2009, "a severe contraction after the positive economic growth of 4.6 percent in 2008".

The global recession hit Gulf Arab oil exporters hard particularly as oil prices fell. The countries have adopted an array of policy measures to ease tight liquidity and prop up sagging investor confidence during the crisis.

The report said it expected inflation to rise moderately this year due to the possible impact on domestic prices of the weakening dollar in economies with a low currency peg.

Gulf Arab countries, except for Kuwait, tie their currencies to the dollar and their central banks invest heavily in dollar-denominated assets.

Labour markets in the region were resilient in 2009 but they remain fragile and unemployment is rising, the report said, citing Jordan where the unemployment rate rose 2 percent to 14 percent in the third quarter of 2009. (Reuters)

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