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Gulf entering an era of softer growth as oil boom fades

The sharp slide in oil prices since the summer won’t cause a major headache for the Gulf States, but it does reinforce the point that these economies are set to lose some steam over the coming years. Falling oil revenues mean that government spending won’t be as supportive of growth as it has been in recent years. At the same time, another boom in oil production seems unlikely in light of rising supplies from elsewhere, notably the US. All told, we expect growth in the Gulf to ease to around 3% in 2015-16. In contrast, lower oil prices will boost the economies of North Africa (Egypt, Morocco and Tunisia) by reducing twin budget and current account deficits. With this coming alongside a return to political stability and strengthening manufacturing sectors, growth there should accelerate over the coming years. Indeed, following several years of underperformance, we think growth in North Africa could surpass that of the Gulf by next year.


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