The Gulf Cooperation Council (GCC) states succeeded in controlling consumer inflation far below the world average, World Bank’s latest Global Economic Prospects report says.
Fixed exchange rates, fuel grants, increased production, and exports growth in 2022 helped Gulf countries achieve this, says the report released on Tuesday.
Kuwait, Saudi Arabia, and the United Arab Emirates registered increased production. The Middle East and North Africa (MENA) production increased by an estimated 5.7 per cent. The region’s highest growth rate in a decade.
While the estimated rebound in 2022 in Saudi Arabia was well above last June’s forecast, the report revises growth projections for 2023 and 2024 to 3.7pc and 2.3pc.
Report authors say, “Oil exporters enjoyed windfalls from increased oil and gas prices and rising production. The rebound reflects in the continuing recovery in services after the slump triggered by the pandemic.”
Different economic conditions and growth paths, high levels of poverty and jobless rates, low labour growth, high vulnerabilities, and fragile political concerns in many countries remain, authors caution.
Consumer price inflation, year-on-year, increased last year to double-digit rates in many countries that suffered significant exchange rate depreciation and faced high food and energy prices.
Increased cost of living and funding stress impacted production among oil importing countries in MENA. Egypt and Morocco noted significant slow growth in production in the first half of 2022.
World Bank authors are not optimistic about MENA growth outlook. They project growth to slow down to 3.5pc in 2023, and to 2.7pc in 2024. They cite the likely regional slowdown mainly to “a fading boom in net oil exporters where growth expectations will slow to 3.3 and 2.3pc in 2023 and 2024, respectively, from 6.1pc in 2022”.
The downward revision of growth prospects reflects expected slowing in major trading partners, new oil production cuts, and lagged effects of tightening domestic monetary policy.
The authors forecast Iraq’s growth to slow to 4pc in 2023 and 2.9pc in 2024, below its pre-pandemic pace. Water and electricity shortages, as well as political instability and violence, are likely to impede a stronger expansion.
They forecast Syria’s growth to contract further in 2023. Reasons authors cite include multiple shocks to its economy, climate impact, continuing violence, policy doubt, cholera outbreaks, and fuel shortages. Protracted conflict has halved incomes between 2010 and 2020. Households face unprecedented levels of poverty and food insecurity.
Authors project MENA’s net oil importers growth to be steady over 2023-24, at slightly above 4pc a year. Although they praise Egypt’s policy reforms that continue to benefit the country, growth will slow to 4.5pc up to the first half of 2023. They cite high inflation that lessens real wages and therefore stress on domestic consumption.
Weakening growth of external demand will limit production and slow tourism. The authors expect fiscal and monetary policy tightening to rein in high inflation and a large current account shortage to further restrain growth.
The World Bank projects Morocco’s growth to pick up to 3.5pc in 2023. Slightly below previous projections, and to 3.7pc in 2024 as its agriculture recovers gradually from last year’s drought.
Report authors expect government spending partially to offset weakness in private consumption stemming from high inflation. Risks to growth remain. Spillovers from further weakness in key trading partners, tighter world financing, increasing climate-related risks, rising social tensions, and political instability highlight the possibility of further economic contractions and increasing poverty.
The report projects the world economy to grow by 1.7pc in 2023 and 2.7pc in 2024. It expects the sharp downturn in growth to be widespread, with forecasts in 2023 revised for 95pc of advanced economies and nearly 70pc of emerging market and developing economies.
(Sudeep Sonawane, an India-based journalist, has worked in five countries in the Middle East and Asia. Email: sudeep.sonawane@gmail.com)
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