Dubai, United Arab Emirates — The economies of countries in the Middle East and North Africa have held up well this year, but double-digit inflation is expected to slow growth in 2023, the International Monetary Fund said on Monday.
The IMF predicts GDP growth of 5% in 2022 for countries in the region. For oil-exporting countries, growth was forecast at 5.2%, mainly due to high oil prices and robust GDP growth in other countries, which offset the impact of high food prices.
But the growth rate is expected to slow in 2023, partly due to inflation driven by high food and commodity prices, the report said. And the outlook has remained so bleak for politically unstable Lebanon and war-torn Syria that the IMF has released no economic projections for either.
Rising energy prices have supported oil-producing countries, such as Saudi Arabia, where economic growth is expected to reach 7.6% this year. Oil exporters are also benefiting from trade diversions caused by the war in Ukraine, with some European countries seeking to replace their oil purchases from Russia.
Overall, the IMF predicts that over the next five years the level of additional inflows and financial reserves to oil-exporting countries in the Middle East will exceed $1 trillion.
The additional financial inflows are critical for Arab Gulf countries as they attempt to diversify their economies away from oil dependence and as the world seeks greener technologies to fuel industry.
Growth in the region next year is expected to reach 3.6% due to deteriorating global conditions such as the impact of the war in Ukraine on commodity prices and a slowing global economy. For oil exporters, growth will likely slow to 3.5% due to weaker oil prices, slowing global demand and OPEC production cuts.
“We expect the outlook for next year to be less variable than this year, growth will decline for both oil-exporting and oil-importing countries,” Jihad Azour told The Associated. director of the IMF’s Middle East and Central Asia department. Hurry.
Inflation, meanwhile, is expected to remain in double digits in the region in 2023, for the third consecutive year. For Sudan, the situation is particularly dire. Consumer price inflation has exceeded double digits and is expected to reach 154.9% this year. In 2021, this figure reached 359%, soaring since the ousting of autocrat Omar al-Bashir in 2019.
“Inflation surprised on the upside, this is the third year you have double digit inflation, especially for oil-importing countries… We still expect inflation to remain high next year, driven by high food and commodity prices,” Azour said.
The IMF has warned that high food and fertilizer prices can create serious food security problems for low-income countries, which could lead to social unrest.
Food prices are still above their 2021 average and are expected to increase by more than 14% year-on-year in 2022, according to the report. And although wheat prices are below their pre-war levels, due to the agreement between Russia and Ukraine to resume Black Sea grain exports, they are still about 80% above their average in 2019. Russia’s invasion of Ukraine impacted exports like sunflower oil, barley, and wheat around the world.
However, Russia announced on Sunday that it would immediately stop participating in the UN-brokered deal, prompting President Joe Biden to warn that world hunger could rise. Russia’s move came after it alleged that Ukraine staged a drone attack on Russian Black Sea Fleet ships off the coast of occupied Crimea on Saturday. Ukraine has denied the attack, saying Russia mismanaged its own weapons.
Egypt is the world’s largest importer of wheat, most of which comes from Russia and Ukraine. Its economy has been hit hard by the coronavirus pandemic and the war in Ukraine. The IMF last week reached a preliminary deal with Egypt that paves the way for the economically struggling Arab nation to access a $3 billion loan.
The IMF says one of the most pressing priorities now is to ease the cost of living crisis. To do this, Azour says the IMF needs to control inflation, shift social spending from an “untargeted system that is now primarily driven by subsidizing food and energy to something that is more targeted. “, and create more jobs – especially for the means. – income earners.