Press release

18 Jan 2011

Beirut

UN Launches World Economic Situation and Prospects Report 2010 in Beirut

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ESCWA and the UN Information Centre in Beirut (UNIC-Beirut) today launched the 2011 World Economic Situation and Prospects report, published yearly by the UN Conference on Trade and Development (UNCTAD). The conference featured a statement by UNIC Beirut Director Bahaa Elkoussy, and a detailed regional presentation by Simon Neaime, the Head of the Economic Analysis Section in ESCWA’s Economic Development and Globalization Division. In his introduction of the report, Elkoussy said it is the product of several UN organizations and is considered one of the most important compilations of economic information and projections issued by the world organization. He said the report is divided into four chapters: global outlook; international trade; financial flows to developing countries; and regional developments and outlook. The report tackles the economic situation and growth in the world in general, and in the Western Asia region, amid the many challenges faced by this and other region of the globe. It also relays economic forecasts for the coming year. For his part, Neaime said that Western Asia economies are expected to grow by 4.5 percent on average in 2011 and 2012, continuing a solid performance from 2010. While solid, the pace of growth is still below the average rate of the years preceding the global economic crisis, according to the report. The report also tackles issues of special interest to the region, such as achieving the Millennium Development Goals. The UN economist added that the report shows that the global recovery may be endangered by high unemployment, fiscal austerity measures, and the possibility of currency wars. Global recovery has been losing momentum since mid-2010 and all indicators point to the weakness of global economic growth. The United Nations forecasts in the report that growth of world gross product (WGP) will be 3.1 percent for 2011 and 3.5 percent for 2012, which is much less than the levels needed to recover job opportunities lost in the crisis. Excerpts from the Report: Oil According to the report, higher oil prices in countries such as Saudi Arabia and the United Arab Emirates, as well as strong private consumption in non-fuel exporting countries, were the main drivers of growth in the region. Bouncing back from a 4.7 percent contraction in 2009, Turkey managed to raise its gross domestic product (GDP) by 7.4 percent in 2010, supported by strong private consumption and investment growth. Lebanon is projected to post 5.0 percent growth for each of the next two years, also driven by private consumption. Non-oil sectors are becoming increasingly important drivers of economic growth, even in the fuel-exporting countries. In Saudi Arabia, both government consumption and public investment were able to contribute to an overall balanced performance. The picture is similar in the United Arab Emirates, with government spending underpinning robust growth in 2011. As a payback to the country’s economic diversification strategy, the services sector, particularly tourism, and the manufacturing sector have also become important drivers of economic growth. The situation is different in Yemen. While its gas production capacity has expanded, Yemen’s overall economic performance is clouded by a water shortage that is hampering agricultural production, as well as by political conditions. Inflation remains low and employment is improving, though still a concern The employment situation generally remains challenging in the region, though there are some signs of improvement. Unemployment rates have stabilized, thanks to the revival of international trade, says the UN report. Turkey’s unemployment rate is expected to fall to below 13 percent in 2011, down from more than 14 percent in 2009. Inflation has slowed down considerably from its peak in mid-2008. Iraq, Jordan and Qatar went through deflation in 2009. In the case of Qatar, deflation persisted in 2010. The region should expect positive but limited inflation rates in 2011 because of increasing food prices and a rise in public sector wages, especially in the countries of the Gulf Cooperation Council (GCC). In line with the inflation outlook, the report says, monetary policies will vary as well from one country to another. Turkey is expected to increase its policy interest rates in reaction to rising price pressures. Countries such as Jordan, Kuwait and Qatar are expected to maintain their policy rates low through 2011. Budgetary prudence and external surpluses Governments in the region have remained generally prudent in managing their budgets. GCC countries increased government spending in 2010, but their fiscal policies are expected to become somewhat less expansionary in 2011. Fuel exporters will continue to post solid budget surpluses in 2011, however, albeit somewhat smaller than those of 2010. Non-fuel exporters, in contrast, will be facing increasing budget constraints. Both Jordan and Lebanon, for example, will continue to run budget deficits of about 10 percent of GDP in 2010 and 2011. Rising public debt and higher interest payments will limit the fiscal space in these countries in the near outlook. External balances in the fuel-exporting countries will continue to show solid surpluses in 2011. In Saudi Arabia, for example, the current-account surplus is forecast to reach 10 percent of GDP in 2011. By contrast, non-fuel exporters are expected to see their trade deficits increase further, because of rising import demand along with the economic recovery. Sharper volatility and a possible drop in oil prices, the UN report says, remain major downside risks for fuel exporters. Economic performance of non-fuel exporters will be directly affected by weaker growth in the major developed economies. Consequently, any renewed economic slowdown in these export markets holds the potential to significantly alter the growth trajectory in the region.
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