WASHINGTON, Oct 10 (Reuters) - A further drop in oil prices, combined with lower remittances as a result of a global financial crisis, will lead to lower growth in the Middle East and North African region, World Bank economists said.
“Oil has been a major contributor to growth in the MENA region in the past couple of years but if prices continue to drop, growth will also decline,” Farrukh Iqbal, the World Bank’s manager for economic development for the region, told reporters.
Iqbal mentioned economists at the World Bank are now working with forecasts for oil prices to average $75 per barrel in 2009. Oil prices have dropped from record highs in July of nearly $150 per barrel, to last trade in New York at about $80 per barrel.
Other than oil prices, a decrease in remittances to the region are also expected to fall and impact growth at the start of next year.
The World Bank lowered its forecast for growth in the region since a global financial crisis accelerated and now sees growth this year at about 4 percent, down from an average of 5.7 percent in 2007.
“The region will not suffer a direct impact from the crisis because overall exposure to foreign debt and to banks in the U.S and Europe is small,” said Ritva Reinikka, a director for economic development for the region at the World Bank. “But indirectly it will hurt investment, the real state sector and contribute to overall higher unemployment levels.”