The fall in oil prices has led to a sharp reversal of fortunes in the Middle East and North Africa. Fears of steep falls in output in the Gulf are overdone, but growth will weaken in the coming years. In contrast, the outlook for the North African economies (Egypt, Morocco and Tunisia) is brightening. Lower oil prices will reduce the fiscal and current account deficits which have plagued these economies in recent years. Moreover, signs that governments are undertaking much-needed economic reforms should support a pick-up in foreign investment. Renewed political instability remains a key risk. But overall we think the North African economies will outperform their oil-rich neighbours in the Gulf in 2015-16.
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