Sat, Feb 06, 2016 - Page 15 News List

World Bank says wars, cheap oil hurting Middle East

DEVASTATION:The bank said that six cities in Syria suffered at least US$3.6 billion physical damage, adding that wars were extracting a bigger toll on human capital


A man rides a motorcycle past damaged buildings in al-Myassar neighborhood of Aleppo, Syria, on Sunday.

Photo: Reuters

The World Bank said on Thursday that last year’s economic growth in the Middle East and North Africa likely came to just 2.6 percent, falling short of a 2.8 percent forecast in October last year as war, terrorism and cheap oil took their toll.

In a new report, the bank said five years of war in Syria and spillovers to neighboring countries have cost the region about US$35 billion in lost output measured in 2007 prices, equal to Syria’s GDP that year.

The plunge in oil prices to about US$30 per barrel from more than US$100 two years ago is causing major problems for the region’s oil exporters, with government revenue falling sharply and budget deficits growing.

The World Bank said Saudi Arabia’s public debt would reach 20 percent of GDP next year, 10 times its level of 2.2 percent in 2013.

“The richest oil exporters in the region, Saudi Arabia, Qatar, Kuwait and United Arab Emirates, have large reserves that will enable them to run deficits over the coming years, although not far beyond that,” the World Bank said in the report. “At current levels of spending, and an oil price of US$40 per barrel, Saudi Arabia will exhaust its reserves by the end of the decade.”

The report cited World Bank estimates of US$3.6 billion to US$4.5 billion in physical damage to just six cities in war-torn Syria: Aleppo, Dar’a, Hama, Homs, Idlib and Latakia. The damage was assessed to housing, health, education, energy, water, transport and agriculture infrastructure.

A similar assessment in Yemen, also hit by war, found US$4 billion to US$5 billion in damage to four cities: Sanaa, the capital; Aden; Taiz and Zinjibar.

However, the wars there and elsewhere might be extracting a bigger toll on human capital, as Syrian refugees languish with little or no work, the bank said., it said.

“A peace settlement in Syria, Iraq, Libya and Yemen could lead to a swift rebound in oil output, allowing them to ... boost economic growth in the medium term with positive spillovers to the neighboring countries,” said Lili Mottaghi, World Bank economist for the region and the author of the report.

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