World Bank: Sharp deceleration expected in MENA economies in 2023


Growth in the economies of the Middle East and North Africa (MENA) region is expected to fall sharply this year, the World Bank said on Thursday.

According to the latest edition of the MENA Economic Brief, the region’s gross domestic product (GDP) growth is expected to tumble to 1.9% in 2023, from 6% in 2022, due to production cuts oil in a context of sluggish oil prices, tightening financing conditions on a global scale and galloping inflation.

Titled “Striking the right balance: Jobs and wages in times of crisis in the Middle East and North Africa region,” the report argues that the decline in growth in the MENA region this year is expected to be more pronounced in exporting countries of the Gulf Cooperation Council (GCC).

Real GDP growth in these countries is expected to be 1% in 2023, compared to 7.3% in 2022, due to lower oil production and oil prices, the document highlights.

In oil-exporting developing countries, growth is expected to decline from 4.3% in 2022 to 2.4% in 2023.

In the region’s oil-importing countries, tighter global financial conditions and high inflation continue to dampen economic activity. Growth should stand at 3.6% in 2023, compared to 4.9% in 2022, estimates the same source.

Improved livelihoods are best represented by changes in per capita income. By this measure, growth in the region as a whole is expected to fall from 4.3% in 2022 to 0.4% in 2023. By the end of 2023, only 8 of the 15 countries in the MENA region will have returned to their level of growth. Real GDP per capita before the pandemic, the report adds.

Although the World Bank has not yet carried out a full assessment of the economic impact of the recent natural disasters in Libya and Morocco, it predicts that “their macroeconomic effects could be modest, as the disruptions that could be caused discount will probably be short-lived.

The report further finds that labor markets in MENA countries differ from those in other emerging and developing countries (EDCEs). During periods of contraction, the unemployment response in the MENA region is almost twice that observed in the PEPDs, notes the report.

Global economic shocks between 2020 and 2022 have had a particularly dramatic impact on employment levels in the region.

The report’s findings highlight that this macroeconomic turbulence may have pushed an additional 5.1 million people into unemployment, beyond the already high numbers observed before the pandemic.

“In times of economic slowdown, governments must make trade-offs between rising unemployment and falling real wages,” explains Roberta Gatti, World Bank chief economist for the MENA region.

“While neither situation is desirable, the policy implications of flexible real wages combined with well-targeted cash transfers are the most effective approach to reducing the long-term economic costs of macroeconomic shocks that families must bear in the MENA region,” estimates the economist.

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