Dubai, United Arab Emirates, October 28, 2013 - The Institute of International Finance (IIF) today released its updated forecast for the Middle East and North Africa (MENA) , noting that the divergence in economic prospects between oil exporting and oil importing countries has grown since the beginning of the Arab Spring uprisings.

"fter nearly three years of political turmoil and uncertainty, the Arab Spring countries are yet to see the light at the end of the tunnel," said Dr. George T. Abed, senior counselor and director for Africa and the Middle East at IIF. "The popular uprisings against authoritarian rule and for human dignity have morphed into various forms of political, sectarian or armed conflicts, dimming the outlook for political stability and economic recovery."

The sixteen countries covered by IIF's overview are expected to register overall GDP growth of 2.9 percent in 2013, rising to 3.8 percent in 2014. The averages, however, mask a sharp divergence as the 10 oil exporting countries show growth of 3.2 percent and 3.9 percent in 2013 and 2014, respectively, while the non-oil exporting countries struggle with 1.8 percent growth in 2013 and 2.4 percent in 2014. More telling are the respective fiscal positions of the two groups where oil exporters achieve average surpluses of 6.3 percent of GDP while oil importers face deficits of 10.3 percent in 2013 and 2014. For the Gulf Cooperation Council (GCC) countries, the average surplus is 10.8 percent of GDP.

Countries facing various degrees of political instability, namely Egypt, Syria and Tunisia, and to a lesser extent Jordan and Lebanon, will continue to struggle to achieve even modest growth with high unemployment, persistent macroeconomic imbalances and challenging prospects.

"Oil exporting countries, except for Libya and Iran, continue to record robust growth rates and large financial surpluses while maintaining steady progress in diversifying their production base," said Dr. Garbis Iradian, deputy director, Africa and the Middle East at IIF and principal author of the report. "The outlook remains favorable. Ample financial resources, healthy banking systems and continued improvement in the business environment have supported private sector investment and growth and reinforced economic diversification in the GCC."

"mong the non-oil exporting countries, Egypt remains a keystone state for the future of the region as a whole," Dr. Abed added. "t the geostrategic level, a closer alignment of the new regime with the broader interests of the three largest GCC countries bodes well for political regional stability. Potential exists for economic cooperation as well, which would be easily expandable to other countries in the region and could vastly improve economic prospects. Saudi Arabia, the U.A.E. and Kuwait have already provided critical economic aid to Egypt and Jordan and have maintained constructive economic relationships with Tunisia and Morocco."

The report noted that more meaningful economic cooperation, involving both the public and private sectors and instituted within a medium-to-long term framework anchored in political stability and fundamental reforms, could bring about vast benefits to both donors and recipients across the whole region.

IIF raised its 2013 growth forecast for the United Arab Emirates to 4.7 percent (from 3.9 percent previously) on higher than expected oil output during the first three quarters of this year. Nonhydrocarbon real GDP growth is forecast to accelerate from 4.1 percent in 2012 to 4.6 percent in 2013, driven by higher government capital spending in Abu Dhabi and continued robust growth in trade, tourism and transportation in Abu Dhabi and Dubai.

"Despite our favorable near-term outlook, IIF has reservations about the renewed cycle of risk taking, as shown by the strong recovery in real estate and the sharp increase in equity market prices," Dr. Iradian added. "IIF welcomes the recent plan of the Central Bank of the U.A.E. that includes limits on banks' exposure to real estate and government-related entities. Furthering structural reforms, strengthening federal institutions and GREs corporate governance, and improving risk management practices are also important to reinforce the U.A.E.'s resilience to external shocks."

The Institute of International Finance (IIF) is a global association of more than 470 financial institutions. Its mission is to support the financial industry in the prudent management of risks, including sovereign risk; the development of sound industry practices and standards; and the advocacy of regulatory, financial and economic policies that are in the broad interests of its members and global financial stability. Within its membership the IIF counts leading global banks, insurers, pension funds, asset managers and sovereign wealth funds, as well as leading law firms and consultancies. More information about the Institute of International Finance is available at www.iif.com.