EBRD Forecasts Modest Economic Growth In Southern And Eastern Mediterranean Region For 2023
The European Bank for Reconstruction and Development (EBRD) is forecasting modest economic growth in 2023 in the southern and eastern Mediterranean (SEMED) region, according to its latest Regional Economic Prospects (REP) report, published today.
The Bank expects a slight pick-up in gross domestic product (GDP) growth to 3.6% in 2023 from 3.1% in 2022 as economies across the SEMED region adapt to the impact of the war on Ukraine, the agricultural sector rebounds, and reforms progress. However, the challenging global inflation outlook and political uncertainty remain downside risks.
The recovery is expected to gather pace in 2024, with average GDP growth of more than 4%, as reforms advance in all of the region’s economies.
The SEMED economies in detail
Growth in Egypt slowed to 4.2% year on year in July-December 2022 (the first half of fiscal year (FY) 2022/23), down from 9% in the same period the previous year.
The slowdown was driven by a deceleration in the manufacturing and construction sectors, which were affected by foreign currency shortages, as well as the impact of the war on Ukraine on Suez Canal and tourism revenues.
The Egyptian pound lost more than 50% of its value against the US dollar between March 2022 and April 2023, amid heightened external vulnerabilities and the central bank’s decision to shift to a flexible exchange-rate regime.
This depreciation, coupled with elevated international commodity prices – Egypt is a net importer of food and oil – pushed inflation close to 33%, despite cumulative policy rate hikes of 1,000 basis points over the previous year.
The slowdown in growth is expected to continue, and GDP is projected to increase by 4% in FY 2022/23. Growth is expected to pick up to 4.8% in FY 2023/24.
In Jordan, growth is expected to remain unchanged at 2.5% in 2023 as global headwinds linger, and tight monetary conditions weigh on private investment.
Medium-term growth will depend on the successful implementation of the government’s “economic modernization plan” to attract foreign direct investment.
In 2024, stronger structural reform momentum, more accommodative monetary policy, and recovering trade flows should support growth of 2.5% once again. The main risks to the outlook include the erosion of competitiveness stemming from an overvalued exchange rate, potential disruptions to global trade, regional instability, and the delayed implementation of structural reforms.
Lebanon’s economy could return to growth of 1% in 2023, after a contraction of 4% in 2022, if the country manages to overcome political hurdles and make some progress on an International Monetary Fund (IMF)-supported program, which would also allow the resumption of negotiations with international partners.
The country’s challenges, ongoing since 2019, have been exacerbated by rising energy and food prices, as well as supply-chain disruptions, while inflation remained in the triple digits, averaging 183.8%, in 2022.
The official exchange rate was devalued by 90% to LBP 15,000 per US dollar on 1 February 2023, but multiple parallel exchange rates persist, and the local currency plummeted to LBP 131,500 per US dollar on the parallel market in March 2023.
In 2024, GDP is expected to grow by 3%, provided reform momentum gathers pace.
GDP growth in Morocco is projected to pick up to 3.1% in 2023, as agriculture recovers and inflation moderates, and as the country’s removal from the Financial Action Task Force’s (FATF)