Non-oil sectors could boost Middle East revenues in 2015

burjkhalifa-LeandroNeumannCiuffo-flickrUAE's economy has been diversified over the years and this year too, the country seeks to draw profits from the non-oil sectors. (Image source: LeandroNeumannCiuffo/Flickr)A steady and planned investment in non-oil sectors in the Middle East is likely to lead to a five per cent growth in revenue this year, predicts a Frost & Sullivan report

Increased consumption, government suport and steady inflation are expected to bolster growth in the Middle East and Africa this year, added the report titled Global Economic Tracker—Insights and Trends (GET-IT) – Emerging Middle East and Africa Quarter 1, 2015, which has used various indicators to demonstrate the economic position of Saudi Arabia UAE, Egypt, Algeria and Nigeria.

Due to favourable government policies and the stable improvement in private sector performance, the Saudi Arabian economy witnessed moderate growth in the first half of 2015, despite falling oil revenue, said the report. The Purchasing Managers’ Index (PMI) went up from 58.5 in February to 60.1 in March this year, signifying an expansion in business activity in the non-oil private sector. Bolstered by this growth, business sentiments are expected to remain bullish in the second half of 2015.

However, the UAE economy already stands diversified, which has made it less vulnerable to oil price fluctuations. Heightened non-oil private sector performance will be the key factor that drives economic growth to approximately 4.5 per cent in the upcoming year, said Frost & Sullivan emerging market innovation senior research analyst Krishanu Banerjee. In addition to increased non-oil activities, greater public sector spending and a large amount of foreign reserves will contribute to the country’s economic well-being.

Growth of around three per cent is expected in Egypt, however, the country’s growth figures are likely to waver due to uncertain political conditions. The existing political scenario is subduing demand, and has, in turn, decreased output in the country’s non-oil sector. In addition, a weak currency is boosting input costs, observed the findings in the report.

Similarly, the second half of 2015 in Algeria’s revenues are expected to drop due to economic uncertainty and a decline in global oil prices. As the fall in oil prices is exerting pressure on budget allocation, government welfare schemes like food and electricity subsidies are getting hampered. Public expenditure cuts and infrastructure project delays are worsening the situation without any respite expected in the second half of 2015.

Nigeria, a leading African economy, is likely to be plagued by high interest rates, devaluation of the local currency, and increased cost of production and these economic dampeners will keep business sentiments bearish in Q3 and Q4 2015. Public sector spending is also likely to be low during this time as the steep decline in crude oil prices has had an adverse effect on government revenues, added Banerjee.

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