Growth in GCC economies may slow down to 3.2% in 2023: World Bank

MENA economies to grow by 3% in 2023, 3.1 in 2024

ABU DHABI: Growth in the Gulf Cooperation Council (GCC) countries is expected to decelerate from 7.3 percent in 2022 to 3.2 percent in 2023, driven by the expected decline of oil prices from the highs reached in 2022, according to forecasts by World Bank economists. Developing oil exporters are forecast to grow at 2.2 percent in 2023, a deceleration from their 3.9 percent growth in 2022, the forecast said. The economists forecast that the MENA region will grow by 3 percent in 2023 and by 3.1 percent in 2024, much lower than the growth rate of 5.8 percent in 2022-2023.

“The MENA average growth rate masks the stark differences across countries,” the World Bank noted. Developing oil importers are expected to grow by 3.6 percent in 2023 and 3.7 percent in 2024 — although this is largely driven by Egypt’s relatively high expected growth. Setting Egypt aside for a moment, other developing oil importers are expected to grow by 2.8 percent and 3.1 percent in 2023 and 2024 respectively. Changes in real GDP per capita are arguably a more accurate measure of changes in living standards.

Following a recovery of 4.4 percent in 2022, growth in real GDP per capita for Mena is expected to decelerate to 1.6 percent and 1.7 percent in 2023 and 2024 respectively, the report said. The slowdown in growth will be experienced across the region, but more acutely in the GCC. GDP per capita growth for GCC countries is expected to decelerate from 5.5 percent in 2022 to 1.8 percent in 2023 and 2 percent in 2024. For developing oil exporters, the corresponding rates are 0.8 percent in 2023 and 1 percent in 2024. For developing oil importers, GDP per capita is expected to grow 2.1 percent in 2023 and 2.2 percent in 2024, World Bank said.

Food price inflation reached double digits for most of the middle-income and low-income Mena economies in 2022, the World Bank noted. For most Mena economies, food price inflation is “much higher” than headline inflation. In fact, food inflation accounts for about half or more of headline inflation in many countries in the region, even though food’s weight in the consumer price index (CPI) is typically around 25 percent. Importantly, the data indicate that that poorer households in December 2022 experienced about 2 percentage point more inflation (year-on-year) than rich households on average in the Mena region. Countries whose currency depreciated vis-a-vis the US dollar also experienced higher levels of inflation in MENA.

After accounting for exchange rate fluctuations, inflation in most MENA countries was moderate or low, indeed lower than the levels seen in the United States. When faced with rising prices in commodity markets, in particular oil and food, countries in MENA put in place policies aimed at containing domestic inflation. Despite these efforts, food inflation in most Mena economies increased since the war in Ukraine and indeed was higher than headline inflation. Increases in the price of food products accounted for half or more of the headline inflation, World Bank noted. – Agencies

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