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Financial markets in a new age of oil (English)

This edtion of the Middle East and North Africa (MENA) economic developments and prospects reports highlights the recent key economic developments as well as the forces underlying the region's economic outcomes. It analyzes the region's medium term growth prospects given global forecasts, and charts the region?s progress with implementing comprehensive structural reforms needed for longer-term growth. For the third year in a row, MENA enjoyed a spectacular year of growth, buoyed by record high growth rates among the region's oil exporters. As oil prices continued their upward climb, the MENA region grew by an average of 6.0 percent over 2005, up from 5.6 percent over 2004, and compared with average growth of only 3.5 percent over the late 1990s. On an annual basis, MENA's average economic growth over the last three years, at 6.2 percent per year, has been the highest three-year growth period for the region since the late 1970s. MENA's regional growth upturn has not been universally shared, however, and resource poor economies are increasingly feeling the adverse impact of higher oil prices. Growth patterns among oil producers, on the other hand, have been increasingly harmonized, reflecting a trend toward common development strategies. Over the medium term, general conditions for maintaining a solid pace for growth appear promising. The oil shock MENA is experiencing has had important financial spillovers. Over the last few years, MENA has seen an upsurge in financial activity, as abundant liquidity has fed a rapid rise in credit growth, surging stock markets, and a booming real estate sector. A troubling aspect about MENA's financial markets is the seeming disconnect between the financial sector and the real private economy, despite the appearance of a relatively deep financial sector by macroeconomic indicators. Along with across the board policy reform, MENA economies continue to look to selective industrial policies designed to enhance specific sector competitiveness and growth to complement more broad-based structural reform. Although the views on industrial policy are changing, and a variety of economic justifications can be made for their use, MENA's own unsuccessful history with industrial policies (and the difficulty in transitioning out of them) should serve as a cautious reminder that the most effective policies for promoting growth rely on strategies to create a neutral and internationally competitive business environment.


  • Author

    Claessens, Stijn, Dyer,Paul D., Grais,Wafik, Keller,Jennifer L., Riordan,Elliot Joseph, Romer,Caspar

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  • Document Type

    Economic Updates and Modeling

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  • Country

    Middle East and North Africa,

  • Region

    Middle East and North Africa,

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  • Doc Name

    Financial markets in a new age of oil

  • Keywords

    oil price;governance and public sector;oil producer;high oil price;real effective exchange rate;trade and investment policy;Return on Average Assets;restrictions on bank activity;lack of storage facility;Financial Sector;labor market outcome;official unemployment rate;cumulative frequency distribution;export of goods;current account balance;portfolio equity flows;cost of subsidy;reduction in unemployment;oil economy;Oil Export;area of governance;private sector credit;equity market growth;access to bank;public sector accountability;progress in governance;net interest margin;source oil;average oil price;crude oil price;oil commodity price;natural gas production;process of reform;financial market development;import of goods;crude oil production;oil production capacity;Foreign Exchange Reserve;quality of public;number of jobs;world oil price;competitive business environment;automated teller machine;barrels per day;free trade agreement;oil sector development;rapid population growth;gulf cooperation council;liquified petroleum gas;oil import bill;economic growth rate;formal safety net;lack of security;public sector bank;opportunity to investor;oil exporter;oil boom;geographic region;external reserve;Business Climate;regional growth;unemployment reduction;governance reform;oil subsidy;fiscal balance;oil wealth;stock market;nonperforming loan;oil revenue;fuel price;resource-poor country;Trade Policy;Trade Policies;energy subsidies;transmission channel;common strategies;fiscal restraint;industrial zone;foreign asset;fiscal stance;windfall revenues;contractual saving;Job Creation;global development;macroeconomic indicator;market capitalization;poverty impact;credit growth;external environment;clothing products;regional unemployment;merchandise export;Real estate;budgetary policy;transmission mechanism;domestic reform;real gdp;financial system;governance index;asset quality;



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Claessens, Stijn Dyer,Paul D. Grais,Wafik Keller,Jennifer L. Riordan,Elliot Joseph Romer,Caspar

Financial markets in a new age of oil (English). MENA economic developments and prospects reports Washington, D.C. : World Bank Group.