The United Nations Economic and Social Commission for Western Asia (ESCWA) today said that in addition to conflicts and related security disruptions in the Arab region, a significant fall in oil prices and their uncertain prospects have become the predominant economic concern.
The Beirut-based UN regional commission released its Survey of Economic and Social Developments in the Arab Region 2014-2015, which assesses the stagnated nature of economic and social developments. The average growth rate of the gross domestic product (GDP) of the Arab region in real terms for 2014 has been estimated at 1.5 percent, barely changed from 2013.
Presented by the Director of Economic Development and Integration Division at ESCWA, Mr. Mohamed El Moctar Al Hacene, the Survey said that the negative growth estimations for Iraq, Libya, and the Syrian Arab Republic, because of intensified armed conflict, have contributed to this stagnation. In addition to that, oil prices, from their yearly peak in June, plunged by more than 50 percent in the second half of 2014.
Despite this significant shift in oil prices, member countries of the Gulf Cooperation Council (GCC) have continued to lead growth in the Arab region, the Survey stated. While lower oil prices have affected nominal national income, their impact is less obvious in price-adjusted real GDP figures given that the level of crude oil production has hardly changed. Moreover, the continued expansion of the non-oil sector has maintained GCC economic growth. Meanwhile, lower oil prices have benefited oil-importing Arab countries by easing their balance-of-payment and fiscal constraints. The Arab region is, on average, forecast to grow by an average of 2.4 percent in 2015, but economic expansion in GCC countries is projected to decelerate. Other Arab sub-regions, with the exception of conflict-affected countries, are expected to mark moderate growth.
According to the Survey’s assessment, the impact of the present oil shock, by running a series of simulation exercises on a Computable General Equilibrium model. The modeling exercise points to a theoretical direction of losses and benefits among Arab countries upon a permanent change in a benchmark oil price. The result reveals that the difference in economic structure gives rise to a different impact even among GCC countries. Although the short-term impact of the fall in oil prices has been moderate, its negative consequences in the long term cannot be ruled out.
The Survey also notes that over the period between 2003 and 2013, a significant increase in female labour force participation rates are observed in the region. Female unemployment rates remain high, compared to male unemployment rates, but the gap has been steadily narrowing.
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