Capital Economics: Egypt’s Economy Gradually Recovering after its ‘Second Revolt’

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Challenges such as large current account and fiscal deficits remain, but three years after the Arab Spring uprisings, the tide is turning in favour of the economies of North Africa, says London-based Capital Economics.

A gradual return to political stability in Egypt and Tunisia should support activity there, while exports are likely to pick up on the back of the modest recovery in the global economy, its analysts note, while expecting overall growth to gradually strengthen over the next couple of years.

Egypt’s economy is gradually recovering following last summer’s “second revolution”, though a fresh outbreak of political unrest remains a risk. However, with the new government undertaking reforms, the outlook is brightening.

Growth in the Gulf region, meanwhile, is likely to slow as the past decade’s boom in hydrocarbon production fades and fiscal policy becomes less supportive, the analysts say.

“The big picture is that growth in North Africa could surpass that in the Gulf come next year,” Capital Economics reckons.

Here are some key highlights from the research firm’s latest outlook report on the Middle East.

-Saudi economy is set to slow over the next few years as government spending rises at a weaker pace and growth in the oil sector eases.

-U.A.E.’s non-oil sector should benefit from the pick-up in the global economy, but rising fears in Dubai of a fresh property bubble, as well as the emirate’s large corporate debts will continue to cast a shadow over the outlook.

-Qatar’s ambitious investment program means it is likely to remain the region’s best performing economy over the next few years.

-In Tunisia, a return to political stability, coupled with faster growth in key euro-zone trading partners, should support a gradual recovery.