Page 7 - DMEA Week 40 2022

DMEA SECURITY & POLICY DMEA

Higher energy bills are expected to stress the region’s oil importers (Image: IMF)

World Bank sees rising inflation, higher

interest rates stressing MENA oil importers

MIDDLE EAST/AFRICA THE economies of the Middle East and North goods such as food and energy lower than the
Africa (MENA) region are expected to grow by global price.
5.5% this year followed by a slowing of growth The report finds that this has had the effect of
to 3.5% in 2023, the World Bank said in its latest keeping inflation in MENA lower than in other
economic update report. regions. In Egypt, for example, average year-on-
Growth will be uneven across the region, as year inflation during the period of March to July
countries face jolting shocks from higher oil and 2022 was 14.3%, but it would have been 4.1 per-
food prices brought on by the war in Ukraine, centage points higher at 18.4%, had authorities
rising global interest rates and economic slow- not intervened.
downs in the United States, China and the Euro Governments will incur additional expenses
area, the bank said. as they increase subsidies and cash transfers to
While the region’s oil exporters are benefit- mitigate the damage to the living standards of
ting from high hydrocarbon prices, oil import- their populations from higher food and energy
ers face heightened stress and risk from higher prices.
import bills, especially for food and energy, and For the GCC and developing oil-exporting
tightening fiscal space as they spend more on countries, this is not of much concern now, the
price subsidies to cushion the pain of price rises report said. Windfall increases in state revenues
on their populations. from the rise in hydrocarbon prices have greatly
The Bank’s analysis forecasts diverging paths increased their fiscal space and will result in
of growth in the region. Gulf Cooperation fiscal surpluses for most oil exporters in 2022.
Council (GCC) countries are on track to grow even after the additional spending on inflation
by 6.9% in 2022, buoyed by high hydrocarbon mitigation programmes.
earnings, slowing to 3.7% in 2023 as hydrocar- Developing oil importers, however, do not
bon prices subside. have such a windfall and will have to cut other
Developing oil-importing countries are expenditures, find new revenues, or increase
expected to grow by 4.5% in 2022 and 4.3% deficits and debt to fund the inflation mitigation
in 2023. However, the slowdown of growth in programs and any other additional spending.
Europe is seen to pose a particular risk, as this Moreover, as global interest rates rise, the
group of countries relies more on trade with the debt service burden for oil importers will
Euro area — especially the North African oil increase, as they must pay a higher rate of inter-
importers closest to Europe: Tunisia, Morocco est both on any new debt they incur and exist-
and Egypt. ing debt they refinance, weighing on countries’
Across the region, policymakers have intro- debt sustainability over time — especially for
duced measures, including price controls and countries with already high debt levels, such as
subsidies, to make the domestic price of basic Jordan, Tunisia and Egypt. ™

Week 40 06•October•2022 www. NEWSBASE .com P7