The report, 'Global Economic Prospects and the Developing Countries 2003,' predicts regional GDP growth of 2.8 per cent in 2003, rising to 3.7 per cent in 2004 if war on Iraq is averted. Growth in 2002 declined to 2.5 per cent from 2.8 per cent in 2001 as the effects of the 11 September attacks continued to be felt, particularly damaging economies reliant on tourism. The effects of external shocks were exacerbated by internal factors such as drought, tightened fiscal and monetary policies, and an unstable exchange rate.

'The MENA region will continue to bear the high costs of conflict and political uncertainty,' said Mustapha Nabli, World Bank chief economist for the Middle East and North Africa. 'This stifles private investment as well as reform efforts, with negative consequences on long term growth.' The bank urged diversification from oil and tourism, as these created vulnerability to sudden falls in export earnings. It also warned of the potential social impact of sluggish growth. 'The bleak growth prospects of MENA have made an already difficult social situation critical, as ever more newcomers to the labour market join the ranks of the unemployed,' said Nabli.