Recent developments

 GDP among the developing countries of the Middle East and North Africa region registered a strong 6 percent gain during 2008, on the back of surging oil revenues during the year’s first half, continued robust non-oil export performance for the diversified economies, and favorable flows of remittances, tourism receipts and foreign direct investment (FDI).⁹ 
These conditions were not to persist however, and the onset of the financial crisis in the United States during September 2008 began to exact a toll on regional growth into yearend 2008 and 2009.

GDP is anticipated to almost halve to 3.1 percent during 2009 as the real-side effects of the crisis take firmer hold, and a return to average growth for the region (near 4.5 percent) is not expected before 2011.
In the interim, those elements which supported growth over the last five years are anticipated to unwind: oil prices are projected to rise only modestly, averaging $66 in 2011; the European export market will remain flaccid; and slowing of services receipts and remittances will exact a toll on growth for both developing oil exporters and the more diversified economies of the region.

Initially, the developing countries of the Middle East and North Africa region were less directly affected by the financial crisis than those of many other developing regions.
The biggest direct effect from the crisis was the acceleration in the decline of oil prices.

That decline of about 65 percent from near $150/bbl to near $60/bbl at present has radically reduced government revenues among developing-country oil exporters, and especially for the high-income Gulf Cooperation Council (GCC) exporters.
These economies include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Over recent years, these countries have become a key source of investment financing (through FDI and other flows) as well as remittances for the diversified developing economies of the region.
The dampening of these income and investment flows is an important element contributing to the slowdown in regional growth.

For the GCC in aggregate, oil and gas revenues dropped from $670 billion in 2008 to an estimated $280 billion during 2009—a massive decline equivalent to 38 percent of the group’s GDP.
Revenues for the developing oil exporters of the region, including Algeria, the Islamic Republic of Iran, Iraq, the Syrian Arab Republic, and the Republic of Yemen declined from $320 billion to an estimated $140 billion, equivalent to 28 percent of GDP.

Such severe revenue declines, against continuation of expenditures at a fairly rapid pace, has caused fiscal balances in a number of oil exporters to go into deficit.
As a result, the public sector’s capacity to mitigate some of the adverse consequences of the crisis through targeted stimulus packages, and other measures, has been reduced.