Despite contracting by 0.1% in 2013 due to political and domestic turmoil, developing countries in the Middle East and north Africa (MENA) region are on a strong recovery path and their GDP could expand to 3.5% by 2016, according to the World Bank. In its latest Global Economic Prospects report, the World Bank maintained that although FDI inflows to the region sharply declined in 2011, increases in oil output, manufacturing and exports have led the steady economic recovery among MENA countries. In addition, while declining international oil prices means the region’s oil importers will improve their current account deficits, the World Bank cautions that persistently high unemployment rates across the region means growth will remain weak.

Although security challenges pose the greatest source of instability to the region – the ongoing conflict between the Iraqi government and rebel leaders of the Islamic State in Iraq and the Levant (ISIS) caused a decline in investor confidence in Iraq – official aid from the Gulf Cooperation Council (GCC) countries to developing MENA economies has been significant in stabilising economic growth. The World Bank estimated that net aid from GCC countries such as the United Arab Emirates to countries including Libya and Syria was worth $22bn, and this critically offset a decline in private capital inflows of $2.1bn in the first five months of 2014.


While this aid will be critical in boosting political and economic stability in countries such as Egypt and Tunisia, tackling unemployment and rising poverty levels will be critical in ensuring that the economic growth among developing MENA countries remains sustainable. According to the World Bank, the MENA region will need to create 28 million jobs in the next seven years to prevent social unrest, and while external aid will be an important source of financing, the region’s governments will also need to develop strong political institutions which can restore investor confidence in the region’s security.