The World Bank's latest growth forecasts show that the Middle East and North Africa (MENA) region will buck the global economic downturn brought on by the Omicron variant, high inflation rate, and rising debt.
Global growth is expected to decelerate markedly from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023 as pent-up demand dissipates and as fiscal and monetary support is unwound across the world, the World Bank noted in its latest report in January
"The rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term," the World Bank stated. "In addition, a notable deceleration in major economies – including the United States and China – will weigh on external demand in emerging and developing economies."
Growth in developed economies will ease to 3.8% in 2022, from 5% last year, while emerging markets will see GDP rise a more moderate 4.6% this year, compared to 6.3% in 2021. The United States’ GDP is expected to expand a subdued 3.7% in 2022 compared to 5.6% in 2021, while the Eurozone will also see a more muted 4.2% growth this year from the 5.2% expansion seen in 2021.
“The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries,” said World Bank Group president David Malpass. “Putting more countries on a favourable growth path requires concerted international action and a comprehensive set of national policy responses.
INFLATION WOES
Global inflation would also be a drag on economic growth. The rate globally reached 4.6% on a 12-month basis, up from 1.2% in May of 2020.
The rebound in global demand and activity since mid-2020, together with supply disruptions and rising food and energy prices, have pushed headline inflation to decade highs across many countries, the World Bank stated.
“Core consumer price inflation – excluding food and energy – has also increased globally; in some economies, this has in part reflected rising housing price inflation,” the bank noted. “The increase in inflation has led various central banks to partially unwind their accommodative monetary policies.”
The US Federal Reserve and a number of other major central banks are expected to raise interest rates, which could help cool prices but also make debt more expensive for vulnerable economies.
“An inadequately forewarned acceleration in the tapering of long-term asset purchases by major central banks could unsettle financial markets and abruptly raise longer-term interest rates,” the World Bank warned. “This tightening of financial conditions could make debt financing more difficult for many borrowers, including EMDE (emerging and developing economies’) governments facing reduced fiscal space.”
Growth in the all-important markets of East Asia are also expected to ease to 5.1% in 2022, compared to their blistering 7.1% surge in 2021. China, the world’s second-largest economy will see its 8% expansion last year ease to 5.1% in 2022
“In China, following a sharp withdrawal of fiscal policy support in 2021, the baseline projections assumes moderate fiscal easing in 2022 followed by insignificant policy tightening in 2023,” the World Bank noted.
India, another market important for most Middle East nations will see a GDP growth of 8.7% in 2022, building on the 8.3% increase last year, on the back of improving investment outlook, particularly in manufacturing.
MENA GOES AGAINST THE TIDE
However, most Middle East markets will buck the trend on the back of diversification policies and higher commodity prices.
The Middle East and North Africa will see growth outperform the global economy, rising 4.4% in 2022.
In fact, the regional growth forecast for 2022 has been revised up by 0.8 percentage point, to 4.4%, reflecting stronger near-term prospects for both oil exporters and importers.
“Oil exporters are expected to reap the benefits of rising oil production and higher global oil prices – both improving revenue collection – and positive COVID-19 developments, including high vaccination rates in Gulf Cooperation Council (GCC) economies. Some economies will also benefit from record-high natural gas prices,” the World Bank noted.
Still, a number of countries in the Middle East, such as Bahrain, Egypt, Lebanon, Morocco, Oman, and Tunisia carry high levels of government debt, which could stall growth in those countries.
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