The MENA region’s non-oil economies remain fragile, but a recovery of sorts is likely over the next year. In Egypt, growth will be supported by the government’s Gulf-funded stimulus package, while Tunisia and Morocco should benefit from the recent improvement in the euro-zone economy. Nonetheless, the fundamental problems that have weighed on growth over the past couple of years, including ongoing political tensions and twin current account and fiscal deficits, persist, leaving these economies vulnerable to external shocks.
In contrast, the balance sheets of the Gulf economies are far stronger, leaving them better insulated in this regard. A rebound in oil production in recent months coupled with strong growth in non-oil sectors should mean that they remain the region’s best performers next year. But over a longer horizon, we think that the tables may turn and the non-oil economies could start to outperform their oil-rich neighbours. The first signs of this switch could emerge in 2015.
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