Word Bank raises its growth forecast for MENA, praises Egypt’s resolve to control inflation

The World Bank expects Egypt’s economy to grow at a 4.8% clip in FY 2022-2023, according to its October MENA Economic Update (pdf).

The forecast marks a downward revision of 0.2 percentage points from its April forecast (pdf), when the bank expected Egypt to grow 5.0% during the current fiscal year.

Egypt is outperforming most other oil importers in the region — the exception being Djibouti, which is expected to see its economy grow 5.3% in 2023.

MENA’s net oil importers are seeing “heightened stress and risk” to their economies due to “higher import bills, especially for food and energy, and from the depreciation of local currencies in some countries,” the report says.

Debt service burdens are growing for oil importers, including Egypt, Jordan, and Tunisia, as global interest rates are on the rise with the wave of monetary tightening, the report notes.

These countries are also facing increased expenses from inflation mitigation programs (think food + energy subsidies and cash transfer programs like Takaful and Karama here in Egypt), which the World Bank says require us to “cut other expenditures, find new revenues, or increase deficit and debt” to continue financing.

Cash (for the poorest) is king: Policymakers in Egypt intervened in “product-markets” through wide subsidies on foodstuffs and energy, which helped to keep annual inflation 4.1 percentage points lower than it would have been without intervention, the World Bank says.

But adopting a “subsidy on food and energy prices that benefits the entire population costs 13.2 times more than allowing prices to increase and supporting just the poorest 10% of the population with a cash transfer,” according to the report.

The region as a whole is on track for its best growth year since 2016 — but performance is mixed: Growth across the MENA region is expected to come in at 5.5% in calendar year 2022, which the World Bank notes is the fastest rate in six years, before slowing to 3.5% in 2023. “This average growth masks uneven patterns across countries. In the GCC, growth is expected to accelerate to 6.9% in 2022” on the back of higher crude oil prices, while non-GCC oil exporters will also see similar (albeit lower) growth.

The same goes for real GDP growth per capita, which is set to accelerate to 3.9% in 2022 but will slow to 2.0% in 2023. “Again, this growth is uneven among the country groups. GDP per capita growth for GCC countries is expected to accelerate to 5.5% in 2022 before slowing to 2.4% in 2023. The corresponding rates are 2.5% and 1.1% for developing oil exporters,” while oil importers will see GDP per capita growth at 2.9% this calendar year and 2.7% in 2023.