IMF downgrades global, MENA economic outlook for 2nd time since outbreak of Ukrainian war

Doaa A.Moneim , Tuesday 26 Jul 2022

The International Monetary Fund (IMF) downgraded global real GDP growth for the second time since the outbreak of the Russian-Ukrainian War to 3.2 percent, down from the 3.6 percent it projected in April and 6.1 percent it expected in 2021.

File Photo: An Egyptian fruit seller works in a market in Cairo. Reuters


This came from the IMF’s World Economic Outlook Report that was released on Tuesday.

The IMF’s forecast is 0.4 percent lower than its April projections.

Moreover, the report expected global economic growth to moderate to 2.9 percent in 2023, lower than April’s projected 0.7 percent.

“Lower growth earlier this year, reduced household purchasing power, and tighter monetary policy drove a downward revision of 1.4 percentage points in the US. In China, further lockdowns and the deepening real estate crisis have led growth to be revised down by 1.1 percentage points, with major global spill overs,” the report explained.

“And in Europe, significant downgrades reflect spill overs from the war in Ukraine and tighter monetary policy,” it added.

The IMF has also revised up its projections for global inflation due to food and energy price hikes to 6.6 percent in advanced economies and 9.5 percent in emerging markets and developing economies in 2022 — upward revisions of 0.9 and 0.8 of a percentage point, respectively.

“In 2023, disinflationary monetary policy is expected to bite, with global output growing by just 2.9 percent,” the report expected.

The report also highlighted that the war in Ukraine could lead to a sudden halt in European gas imports from Russia and could make curbing inflation a hard mission for countries.

For the Middle East, Central Asia, and Sub-Saharan Africa, the report noted that their outlooks remain positive owing to the effects of elevated fossil fuel and metal prices for some commodity-exporting countries.

However, the report revised down MENA’s real GDP growth to 4.8 percent and 3.5 percent in 2022 and 2023, respectively, down from five percent in 2022 and 3.6 percent in 2023 expected in April.

Touching upon global trade, the report expected its growth to slow down in 2022 and 2023 by more than what was previously expected, reflecting the decline in global demand and supply chain problems.

“The USD’s appreciation in 2022 — by about five percent in nominal effective terms as of June compared with December 2021 — is also likely to have slowed world trade growth, considering the USD’s dominant role in trade invoicing, as well as negative financial balance sheet effects on demand and imports in countries with dollar-denominated liabilities,” the report demonstrated.

The report did not include its projections for Egypt’s real GDP growth.

In April, the IMF lowered its projections for Egypt’s real GDP growth in 2022 by 0.3 percent to reach 5.6 percent — down from the 5.9 percent expected in January — before slowing down to 5 percent in 2023, which were the highest among oil importing countries across the Middle East.

A fresh loan deal is awaiting the IMF’s Board of Directors approval after the fund’s mission finalises talks with the Egyptian authorities in July.

The anticipated loan is expected to be greenlit under the IMF’s Extended Fund Facility, which is the same programme Egypt obtained its $12 billion loan to execute its economic reform programme from November 2016 to July 2019.

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