Economic growth increased in the Middle East in 1996, while the region’s external debts rose slowly and more private money flowed in, according to a World Bank report. However, most foreign private investment went to just three countries, Egypt, Morocco and Tunisia.

Gross national product (GNP) in the Middle East and North Africa rose by 12 per cent in dollar terms in 1996 due to high oil prices and the recovery from drought in the Maghreb countries, the World Bank says in its Global Development Finance report for 1997. The report used to be called the World Debt Tables: the name change reflects the growing importance of private investment in world capital flows.

While growth picked up in 1996, the region’s debt rose by only 2.2 per cent to $221,000 million. Most of this increase was due to more borrowing by Algeria, while the private sector in Saudi Arabia and Bahrain also borrowed more. Net transfers to the region reached $1,900 million in 1996, compared to a net outflow of $5,600 million the year before which reflected debt repayments by Iran. The 1996 figure is only 0.3 per cent of regional GNP, the lowest of all developing regions.

More private money is flowing into the region. Foreign direct investment rose 19 per cent to about $2,500 million, but almost all of this went to Egypt, Morocco and Tunisia. ‘Lebanon and Jordan are beginning to attract foreign direct investment, but at lower levels,’ the report says. Portfolio equity flows also tripled because of privatisation-led stock market growth in Egypt and Morocco, but still only amount to $650 million. However, equity investment is likely to rise gradually.