Inflation is expected to remain the same as last year at 14.8 percent in the region this year, driven by inflation in middle-income and emerging market countries such as Egypt and Tunisia.
The International Monetary Fund expected that the Middle East, North Africa and Central Asia will witness a slowdown in growth in 2023, especially in oil-exporting countries, while poor countries, especially those experiencing conflicts such as Sudan, will remain under the pressure of high inflation, although it is expected to decline.
In its report on the prospects for the regional economy, the Washington-based fund lowered its growth estimates in 2023 to 3.1 percent, compared to 3.6 percent in its previous report in October, after the region achieved 5.3 percent growth in 2022.
On the other hand, the Fund expected poor countries to move from a contraction of 0.6 percent, which they recorded last year, to a slight growth of 1.3 percent. “The decline in growth is an acceptable result in the context of addressing the most difficult economic problem that we suffer from in a large number of countries in the world,” which is inflation, said Jihad Azour, director of the Middle East and Central Asia Department at the Monetary Fund.
According to the report, the inflation rate is expected to remain the same as last year at 14.8 percent in the region this year, driven by inflation in middle-income countries and emerging markets such as Egypt and Tunisia.
The Sudan conflict is an additional burden
Although the Fund expects countries with low-income economies, including Yemen, Sudan, Mauritania, Somalia and Djibouti, to record lower inflation (46 percent) in 2023 than last year (83 percent), this “is not sufficient compared to the needs of these countries.” According to Azour.
Since the middle of last month, Sudan has been witnessing a bloody conflict that has forced thousands to flee internally or seek refuge in neighboring countries, and has caused shortages of food, water, electricity, and cash, which may lead to a change in economic conditions.
Azour said, “It is difficult to predict, especially since this conflict erupted a short time ago, and it is not clear how it will develop.” Azour pointed out that the instability in Sudan for years “makes it difficult to maintain a degree of economic stability given the already weak economic structure” and “the additional burdens imposed by the (recent) internal events on the Sudanese people.”
Violent battles continue in Sudan between the army commander, Abdel Fattah al-Burhan, and the commander of the Rapid Support Forces, Muhammad Hamdan Dagalo, nicknamed “Hamidti”, despite a truce that is regularly extended without commitment to it, while the international community warns of a “catastrophic” humanitarian situation. Azour said, “What we can see at this stage is that there is an additional burden on neighboring countries to receive refugees.”
The International Monetary Fund attributed the slowdown in growth, which is expected to be recorded in the region, in particular to the reduction in oil production. In 2023, the oil-exporting countries in the region will record a slowdown in growth to 3.1 percent, after it reached 5.7 percent in 2022, according to the Fund’s expectations. Azour explained, “The extension of the OPEC Plus agreement to reduce oil production had an impact on the oil-exporting countries.”
Last December, the member states of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and its ten allies led by Russia (OPEC Plus) agreed to maintain the path approved in October to cut production by two million barrels per day until the end of the year. 2023.
Recently, the region witnessed a breakthrough at the diplomatic level, with Saudi Arabia and Iran reaching a surprising agreement on March 10 to resume their relations, which analysts believed might be reflected in several files, in which the two most prominent regional powers were on opposite sides.
Azour believed that “every decline in the level of tension is a good thing for the economy… All breakthroughs are a positive element, as they reduce risks on the one hand and open new horizons for economic movement and investment on the other hand.”