Global Slowdown Decelerates MENA Economic Growth
The MENA region’s economic growth has taken a hit this year because of spillover effects from the global slowdown, rising inflation and the ongoing Russia-Ukraine war.
The World Bank revised its 2023 forecast downward due to oil production cuts by OPEC+ in October 2022 and April 2023, and additional cuts by Saudi Arabia in June 2023.
Analysts pointed out that average oil prices for 2023 have not returned to the 2022 levels, and an increase in oil production in other countries, especially the US, might put downward pressure on global oil prices.
Saudi Arabia’s economy, as per World Bank, is projected to contract by 0.9 percent in 2023 due to lower oil production levels and subdued prices.
“Growth in the remaining GCC economies is expected to also slow down sharply due to less favorable oil market prospects. In the United Arab Emirates, growth will plunge to 3.4 percent, down from 6.6 percent in 2022.”
As for Oman, economic growth will slip to 1.4 percent from 2022’s 4.3 percent. The World Bank forecasts economic activity in the GCC to recover in 2024 when OPEC+ production is relaxed.
Natural Disasters in MENA
Analysts believe the September disaster’s earthquake in Morocco, which killed around 3,000 people, followed by the floods in Libya will take a toll on MENA’s economy. Both disasters left substantial infrastructural damage, leaving hundreds of thousands of individuals in dire need for humanitarian assistance.
It should be noted that the World Bank hasn’t completed a full assessment of Morocco’s earthquake and Libya’s floods. But empirical evidence suggests there would be a reduction in growth and an increase in indebtedness in the medium-term to finance the reconstruction.
For Morocco, the report says growth is expected to pick up to 2.8 percent in 2023 from the past year’s 1.3. Global macroeconomic shocks have not had much of an impact on Morocco.
MENA Needs Proper Policy Reforms
Ferid Belhaj, World Bank vice president for the MENA region, said structural challenges faced by MENA’s labor markets could inadvertently worsen without proper policy reforms.
He believes the time for reform is now. Roberta Gatti, chief economist for the World Bank MENA region, highlighted that the MENA region is unique compared to the rest of the world. “The reaction of unemployment is almost twice as large as it would have been in other emerging markets and developing economies.”
She highlighted that five million people in the MENA region have lost their jobs due to economic shocks since 2020 – COVID-19, and ongoing Russia-Ukraine war. “Five million people will find it much harder to find good jobs in the future.”