Outlook brightens in North Africa, but Gulf growth to slow

After a torrid few years, the outlook for the North African economies is brightening. Political tensions are easing and the provision of external financial support has shored up balance of payments positions. Admittedly, elections in Egypt and Tunisia later this year could prove to be flashpoints for civil unrest. At the same time, major challenges remain – notably, reining in large budget deficits. Nonetheless, we expect a gradual recovery over the next couple of years. Growth is unlikely to return to the pre-Arab Spring rates of 5-6%, but it could pick up to around 3-4%. In contrast, we think growth in the Gulf is likely to slow a little as fiscal policy becomes less supportive. All told, we expect growth in the MENA region as a whole of 3.0-3.5% over the next couple of years.