World Bank forecasts uneven recovery in Middle and North Africa

Economies in the Middle East and North Africa (MENA) region are expected to grow 5.2% in 2022, the fastest rate since 2016, thanks to oil price windfalls benefiting the oil exporters region. But greater uncertainty surrounds this forecast due to the war in Ukraine and ongoing threats from variants of COVID-19, the World Bank has projected. 

Titled “Reality Check: Forecasting Growth in the Middle East and North Africa in Times of Uncertainty,” the World Bank‘s latest economic update forecasts an uneven recovery as regional averages hide wide differences. Oil producers will benefit from higher oil prices and vaccination rates as fragile countries fall behind. But tighter global monetary policy, the unpredictability of the pandemic’s course, ongoing supply chain disruptions, and food price increases increase inflation risks for the entire region.

“The harsh reality is that no one is out of the woods yet. The threat of COVID-19 variants persists and the war in Ukraine has multiplied the risks, particularly for the poor who bear the brunt of rising food prices. food and energy. A healthy dose of realism about the region’s growth prospects during these uncertain times is essential,” said Ferid Belhaj, World Bank Vice President for the MENA region. “Managing this wave of uncertainty is a key challenge for policymakers and the World Bank is committed to working together with governments in the MENA region during this time of heightened risks,” he added.

Currency depreciation in some MENA countries is already adding to inflationary pressures. Economies facing fiscal and debt vulnerabilities will likely face more challenges as they roll over existing debt or issue new debt amid tighter financial conditions as global central banks seek to contain inflation expectations.

Inflationary pressures created by the pandemic have been exacerbated by the war in Ukraine. Countries in the MENA region rely heavily on food imports, including wheat from Russia and Ukraine. Rising food prices and increased risk of food insecurity are likely to hurt low-income families more because the poor tend to spend more of their household budget on food and energy than rich households. The full extent of the consequences of the war has yet to be determined. Still, early indications point to an increase in the economic difficulties already plaguing the MENA economies, particularly oil-importing middle-income countries.

According to the report, despite a projected 5.2% growth rate, GDP per capita, an indicator of people’s standard of living, will barely exceed pre-pandemic levels due to generally lacklustre performance in 2020-2021. In the Gulf Cooperation Council countries, buoyed by rising oil prices, GDP per capita is projected to grow 4.5% in 2022, but will not recover to pre-pandemic levels until By contrast, in 2022, GDP per capita for economies is projected to grow 3.0% for oil exporters and 2.4% for oil importers in the region, both barely raising living standards above pre-pandemic levels. Overall, if these forecasts materialize, 11 of the 17 economies in MENA may not recover to pre-pandemic levels by the end of 2022.

Adding to the uncertainty related to the pandemic, only a third of middle-income MENA countries have higher vaccination rates than their income peers. As of April 4, 2022, the Gulf countries except Oman, which has a vaccination rate of 57.8%, have an average rate of 75.7%, which is much better than their income peers. But countries like Algeria and Iraq have vaccinated around 13-17% of their population and Yemen and Syria have vaccination rates in the single digits, thus leaving them more exposed to the economic and health consequences of Covid-19 in the near future.

Each MENA Economic Update chooses a special focus area and the April issue provides a reality check of growth forecasts over the past decade, including those provided by the World Bank, International Monetary Fund and the private sector. Economic forecasts are a valuable tool for governments as they prepare for the future, especially in times of uncertainty. The authors found that growth forecasts in the MENA region over the past decade were often inaccurate and overly optimistic compared to those in other regions. Overly optimistic forecasts can lead to economic contractions in the future. A key driver of forecast uncertainty is the availability and accessibility of quality and timely information, an area where MENA lags behind the rest of the developing world.

“In the current context of global and regional uncertainty, obtaining the most accurate forecasts possible becomes even more important. Lack of data and limited data openness are risky strategies. Only with better and more transparent data can forecasts be made and, with them, planning and policymaking, improve,” said Roberta Gatti, World Bank Chief Economist for the MENA region.

Conflict economies such as Libya and Yemen have outdated GDP data, the latest available for 2014 and 2017 respectively. Only 10 of the 19 MENA economies covered by the World Bank Group have monthly or quarterly data on industrial production; for the remaining nine, the information is not publicly available; and none publish monthly unemployment data. The report provides guidance on how to improve national data systems.