Syria spillover dims prospects for 2013

Fitch forecasts 2.5 percent growth for the year

Growth prospects for 2013 are fairly better than the economy’s performance during the past year. Fitch Ratings’ Middle East report expected GDP growth to be at 2.5 percent in 2013, up from the previous two percent estimated for 2012.

The report said uncertainty stemming from the conflict in Syria will be a major drag on growth in 2013: Inflows of tourists will fall, while those of refugees will increase. Trade through Syria also risks being disrupted in 2013.

The report said public deficits will be financed through inflows of Foreign Direct Investments (FDI) and external borrowing. It said domestic banks will likely finance the $2 billion worth of Eurobonds that will mature in 2013.

The fiscal position in 2013 faces the risk of being hit by a comparatively weaker economy. Apart from the conflict in Syria which is already clouding the domestic political scene, parliamentary elections will be another source of tension. However, the report said, it is unlikely that the budget deficit will widen, as public revenues and spending are expected to remain flat due to political constraints.

Fitch forecasted the current account deficit to drop to 15.2 percent of GDP in 2013, down from the previous 16.5 percent in 2012. It expected the debt-to-GDP ratio to drop to 131.9 percent, compared to 132.6 percent in 2012.