Dubai: Economic growth across the Middle East could be cut significantly because of the political upheaval roiling the region, a senior analyst at credit agency Moody’s Investors Service said on Monday.
Tristan Cooper, the firm’s head analyst for regional sovereign ratings, said as much as 2 percentage points of economic growth could be wiped out in 2011.
“Now that we’ve seen this political turmoil erupt in the region, it’s likely that the economic growth trajectory will have been altered quite significantly,” he said at a conference here.
Numerous countries across the Middle East and North Africa have been gripped by popular uprisings calling for widespread political reforms in 2011. Protests in Tunisia and Egypt toppled leaders who had been in power for decades, and armed rebels in Libya are threatening the regime of longtime ruler Moammar Gadhafi.
Cooper cautioned that forecasts for 2011 and 2012 have “a high degree of uncertainty” because it’s unclear how the unrest will play out and whether it will spread.
Growth in 2012 could also be affected, but to a lesser extent “assuming that the political turmoil abates and things begin to get back to some degree of normality,” Cooper said.
The International Monetary Fund (IMF) predicted in late January that economies across the Middle East and North Africa are likely to grow by 4.6% in 2011, lower than its earlier forecast of 5.1%.
Separately, Moody’s said it is keeping a “cautious” outlook on the financial health of state-linked companies in the oil-rich Gulf Arab states in light of political developments in the region.
Many Gulf companies had their credit ratings knocked down over the past two years as the global financial crisis hit the region, popping property bubbles and revealing billions of dollars of bad debt, particularly in Dubai.
Moody’s said the situation has now stabilized somewhat as the economy recovers, but that weaker companies could still face pressure.
“While we believe that (Gulf) corporate credit quality could further stabilize, we are mindful of the near-term economic impact that regional political instability could have on selected markets and issuers,” the rating agency said.