High uncertainty weighs on growth in the MENA region

High uncertainty hangs over economic growth in the Middle East and North Africa (MENA) region in 2022 as “downside risks dominate”, according to the latest projections from the International Monetary Fund (IMF) released on Wednesday.

“The war in Ukraine is having a considerable impact on the region through a multitude of global and direct channels, with a differentiated impact depending on the groups of countries”, underlines the IMF which reports an “uneven” recovery.

Oil-importing countries in the MENA region are facing rising commodity prices and tighter financial conditions, which are fueling inflation and affecting external and fiscal accounts. Some countries are also directly exposed, given their heavy reliance on wheat and energy imports from Russia and Ukraine.

Thus, says the international institution based in Washington, real GDP growth should reach 5% in 2022, an increase of 0.9 percentage points compared to the projections of October, against 5.8% in 2021.

“This masks stark differences between countries: oil exporters are expected to grow by 5.4%, compared to 4.4% and 1.1% in emerging and middle-income countries and low-income countries (LICs) , respectively,” the report states.

“Inflation is expected to remain elevated at 13.9% due to higher food and energy prices and, in some cases, exchange rate depreciation and loose monetary and fiscal policies,” we say.

Economies in the MENA region and the Caucasus and Central Asia (CCA) face a deteriorating outlook, given limited policy space amid high debt and high inflation, experts at the institution say. Bretton Woods.

For many countries, debt is expected to rise further in 2022 and remain above pre-pandemic levels in the medium term. Gross public financing needs are projected to increase from $537 billion in 2020-21 to $584 billion in 2022-23.

By 2024, the impact of faster-than-expected monetary policy normalization in advanced economies is expected to increase annual fiscal interest burdens in emerging and middle-income countries by about 4.5% of fiscal revenue. The IMF warns that a protracted war in Ukraine and new sanctions on Russia would lead to lasting trade disruptions, rising commodity prices and prolonged shortages of vital food items. Such a situation will weigh on commodity-importing countries, and raise concerns about food security, particularly in LICs, as well as risks of social unrest.