Just as the war in Ukraine is disrupting supplies and fuelling already-high inflation, economic growth in the Middle East and North Africa (Mena) region is forecast to be “uneven and insufficient” this year, according to the World Bank.
Growth rates in the region envisage a narrative of diverging trends.
As oil exporters benefit from surging prices, higher food prices have hit the whole region.
The GCC is expected to notch up 5.9% growth this year, buoyed by oil prices and helped by a vaccination rate much higher than the rest of Mena.
But most Mena economies — 11 out of 17 — are not seen exceeding their pre-pandemic GDP per capita in 2022, says the World Bank.
GCC economies have seen a relatively strong start to 2022 with the hydrocarbons sector having benefited from increased oil production so far this year, says Emirates NBD.
Its survey data for the first quarter of the year point to a solid expansion in non-oil sectors as well, with strong growth in business activity in the UAE, Saudi Arabia and Qatar.
In the wider Mena region, however, countries like Egypt, Morocco and Tunisia – home to large, mainly urban populations, but lacking oil wealth – are struggling to maintain subsidies for food and fuel that have helped keep a lid on discontent.
Egypt has been struggling to maintain a bread subsidy programme used by about 70mn of its citizens with the coronavirus pandemic hitting the national budget, and surging wheat prices are exacerbating the challenge.
The World Food Programme has warned that people’s resilience is at “breaking point,” in the region.
Global foods costs are up more than 50% from mid-2020 to a record and households worldwide are trying to cope with the strains on their budgets.
In North Africa, the challenge is more acute because of a legacy of economic mismanagement, drought and social unrest that’s forcing governments to walk a political tightrope at a precarious time.
The MENA region’s net food and energy importers are especially vulnerable to shocks to commodity markets and supply chains resulting from Russia’s war on Ukraine, according to the International Monetary Fund.
That’s in countries where the rising cost of living helped trigger the Arab Spring uprisings a little over a decade ago.
The region’s GDP is forecast to rise 5.2% this year after an estimated 3.3% expansion last year and a 3.1% contraction in 2020.
“Even if this high growth rate for the region as a whole materialises in this context of uncertainty, and there’s no guarantee that it will…(it) will be both insufficient and uneven across the region,” according to Daniel Lederman, World Bank lead economist for the MENA region.
Countries that are net importers of oil and food and which entered 2022 with high levels of debt as a ratio of GDP are most vulnerable, he said, pointing to Egypt and Lebanon as examples.
Even before Russia invaded Ukraine, food prices had been rising around the world, driven by the higher shipping costs, energy inflation and labour shortages that have followed in the pandemic’s wake, along with extreme weather.
Food crisis was likely to worsen in the Middle East and North Africa as Covid-19 continued, according to a report from the regional directors of Unicef, the Food and Agriculture Organisation, WFP and World Health Organisation in July 2021.