The International Monetary Fund (IMF) has predicted that economic growth in the Middle East and North Africa (MENA) economies will drop to 3.1% in 2023 from 5.3% in 2022.
The MENA region was surprised by the upside in 2022 despite the string of global shocks. In a briefing at the IMF-World Bank Spring Meetings, Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said, “We estimate that real GDP rose by 5.3%, reflecting strong domestic demand and a resurgence in oil production.”
“However, growth is projected to slow this year to 3.1% due to tight policies to restore macroeconomic stability, agreed OPEC+ production cuts, and the fallout from the recent deterioration in global financial conditions,” he said.
Development among MENA oil exporters is anticipated to decrease, from 5.7% in 2022 to 3.1% in 2023, as most of the countries’ critical development drivers transition from oil to non-hydrocarbon activity.
Growth is also forecast to decline in the region’s developing markets, falling from 5.1% in 2022 to 3.4% in 2023. In comparison, low-income nations will continue to lag growth at 1.3% this year as they battle with high commodity prices, macroeconomic instability, and nation-specific fragilities, according to Azour.
He claimed that although the GCC’s growth will be slower due to the OPEC+ production cuts, higher oil prices will compensate for the adverse effects on the fiscal and external balances. However, MENA oil importers may see more significant fiscal and international pressures due to increasing oil prices.
Azour also said that the countries in this part of the world face four challenges in 2023, which are dealing with the effects of inflation, global uncertainty, international financing difficulties, and economic reform developments.
He also explained that dealing with inflation may require increasing interest rates, which affects economic growth. At the same time, uncertainty and geopolitical tensions pervade all global horizons, and their consequences fall on everyone’s shoulders.
He claimed that inflation in the area is expected to hold steady at over 15% in 2023 after skyrocketing last year before mildly falling in 2024.
Meanwhile, talking about MENA, Italian Foreign Minister Antonio Tajani said that his country wants the IMF to start disbursing a loan to Tunisia without conditions.
During a press conference with his Tunisian counterpart, Antonio Tajani vowed to work on Tunisia’s behalf in negotiations with the IMF, repeating Italy’s proposal that the loan be delivered in two tranches and not be fully dependent on all reforms being in place.
“But not utterly conditional on…the conclusion of the reform process. Start financing, encourage the reforms,” he told reporters.
President Kais Saied recently rejected IMF “diktats”, which asked Tunisia to carry out economic reforms and subsidy cuts as terms for the stalled bailout.
Saeed said he would not hear “diktats” from abroad, warning that the subsidies could lead to unrest.
European leaders feared the collapse of the Tunisian economy could increase the migrant crisis further.
Tunisia’s debts amount to about 80% of its gross domestic product, and it reached a preliminary agreement with the IMF in October 2022 for a new USD 1.9 billion loan to help overcome the financial crisis.
However, talks did not bear any fruitful results after Tunisia failed to implement a reform program to restructure more than 100 indebted state-owned companies and lift subsidies on some essential goods and services.