Expected economic growth rate for Arab countries to rise to 5.4% in 2022: AMF

The Arab Monetary Fund has released the 17th edition of its Arab Economic Outlook Report for 2022-23.

According to the report, the global economy is experiencing challenges related to the global supply chains and high commodity prices, which raise concerns about global food security. This has led to international institutions reducing their forecasts for global economic growth issued earlier in January.

It is expected that growth paths in Arab countries will be affected by significant factors during 2022 and 2023, including the impact of recent global developments on Arab economies, macroeconomic policies, and the continuation of financial packages and their impact on containing the repercussions of Covid-19.

The growth rate of Arab economies as a group is projected to rise to about 5.4 per cent in 2022, a significant increase from about 3.5 per cent in 2021. Many factors have contributed to this rise, including the relative improvement in global demand and high sectoral growth rates. There is also a positive impact of implementing economic reform programmes and adopting future visions and strategies aimed at enhancing economic diversification, improving business environments, encouraging private investment, and improving economic resilience.

Nevertheless, the AMF expects Arab countries’ economic growth slow to about 4 per cent in 2023 due to the decline in global economic growth, commodity prices, and gradual exit from expansionary fiscal and monetary policies.

The report forecasts that oil-exporting countries in the Arab World will benefit throughout the year from the increased oil production quantities within the “OPEC+” agreement and relatively higher oil and gas prices in international markets, which will support public spending to enhance growth.

Overall, Arab oil producers are expected to grow by 6 per cent in 2022, compared to 3.2 per cent in 2021, while oil prices are expected to decline in 2023.

The GCC countries are expected to record a relatively high growth rate of 6.3 per cent in 2022, compared to 3.1 per cent in 2021, thanks to a combination of factors, including the recovery from the Covid-19 pandemic, economic reforms, and continued adoption of stimulus packages, while 2023 will see a decline to 3.7 per cent in economic growth.

As for other Arab oil exporters, they will benefit from increased production quantities within the OPEC+ agreement and a rise in global oil prices to raise their growth rates. As a result, they are expected to achieve 4.6 per cent in 2022, which is higher than 3.1 per cent in 2021. However, due to business environment challenges, their growth rate will come down to 3.9 per cent next year.

Oil-importing Arab countries are expected to achieve a moderate 4.1 per cent growth rate in 2022, compared to a 2.7 per cent growth rate in 2021, owing to their internal and external balance challenges.

However, a relative improvement in the economic growth rate of the group countries is projected in 2023 to reach 4.6 per cent due to improved aggregate demand levels and a gradual easing of the pressures on public budgets and balances of payments due to the expected decline in commodity prices.

The AMF also expects inflation rates to reach relatively high levels in some Arab countries during 2022, brought on by factors including food price increases, energy price increases, and escalating inflationary pressures.

Furthermore, agricultural production changes related to climate change will also affect general prices in some countries.

The inflation rate in Arab countries is expected to reach 7.6 per cent in 2022 and 7.1 per cent in 2023.