The figures were announced by WB chief economist of the Middle East and North Africa (MENA) region Roberta Gatti in answer to Ahram Online's question about the WB’s outlook for the Egyptian economy amid the Russia-Ukraine crisis during a virtual event the WB organised on Thursday to launch its report titled “Reality Check: Forecasting Growth in the Middle East and North Africa in Times of Uncertainty."
Gatti added that Egypt is the only country in the group of middle-income oil-importing countries that maintained its forecast, having showed robust growth over the past few years.
Asked about the impact of the Ukraine conflict on Egypt’s debt levels, Gatti noted that the report does not include data on debt, but rather deals with the impact of the crisis on the fiscal deficit of MENA countries.
Accordingly, Egypt’s fiscal balance is projected to rise to -7.9 percent of GDP in 2022 on a fiscal-year basis, up from -7.4 percent in 2021, before slowing down to -7.3 percent in 2023.
The report shows that Egypt’s current account balance is expected to post -6 percent of GDP in FY 2021/2022, up from -4.6 percent in 2021, before edging down to -5 percent in FY 2022/2023.
With the figures in the report for Egypt measured on a fiscal year basis, not a calendar year basis, the report said that there are several downside risks for Egypt.
The report attributed that to Egypt being a net importer of fuel and food commodities, a destination for Eastern Europe tourists, and to the increase of key interest rates by one percent (100 bps) in March.
“Egypt’s growth prospects for the full calendar year may paint a different picture,” the report noted.
The report forecasts the MENA region to grow by 5.2 percent in 2022 after a recovery of 3.3 percent in 2021, the fastest since 2016.
“The recovery appears to be uneven across different country groups. Oil exporters are expected to grow by 5.4 percent on the back of the recovery from the pandemic, the expected increase in oil output, and the elevated oil price. On the other hand, oil importers are expected to grow by 4 percent, lifted by expected high growth in Egypt, while the momentum of recovery significantly slows relative to 2021 in most of the other oil importing countries, due to the expected increase in importing bills in food and energy commodities,” the report explained.
In 2022, 11 out of 17 countries in the region will not be able to recover to their pre-pandemic standard of living, while the recovery is expected to be faster for oil exporters than oil importers in the region as energy prices rose in 2021 and hiked following the Russian incursion into Ukraine, according to the report.
“Forecasts for the region for 2022 remain fluid due to uncertainty caused by the pandemic, the tightening of global monetary policy, and the Ukraine war. The region is facing considerable inflationary pressures due to global inflation associated with disruptions caused by the pandemic, commodity price inflation accelerated by the Ukraine war, and currency depreciations in some countries,” the report stated.
In January, the WB raised the region’s real GDP forecasts to 4.4 percent in 2022, up from 4.2 percent projected in October, before deaccelerating to 3.4 percent in 2023.
Gatti explained that the Russian war in Ukraine will have direct impacts on households and the region, including a reduction in the trade and fiscal balances in oil and food importing countries as well as on companies, particularly those that rely on energy and wheat as inputs.
Moreover, the war has indirect implications on MENA’s economies, including financial instability in countries with high debt and debt in foreign currencies, heightened social unrest, potential delays or reversals of reforms in fiscal and social protection, and diversion of humanitarian assistance away from the region’s fragile states.