Econostrum | Economic News in the Mediterranean

EBRD predicts 3.5% growth in 2021 for Southern and Eastern Mediterranean countries

Written by Eric Apim on Tuesday, June 29th 2021 à 16:05 | Read 502 times

Most SEMED countries are counting on the return of tourists to boost their growth (photo: F.Dubessy)
Most SEMED countries are counting on the return of tourists to boost their growth (photo: F.Dubessy)
MEDITERRANEAN. The European Bank for Reconstruction and Development (EBRD) has revised upwards its regional economic outlook for the Southern and Eastern Mediterranean countries (SEMED) in its latest analysis. The latter should experience growth of 3.5% in 2021. The institution is also confident for 2022 with an expected increase of 4.6%. However, the study, published on Tuesday 29 June 2021, states that it would be possible provided that the region's economies are "supported by structural reforms, a recovering foreign investment and trade flows".

After an average decline of 2.1% in their gross domestic product (GDP) in 2020, this region is benefiting from an accelerated recovery. However, it could stall in some countries due to "slow tourist arrivals, rising fiscal pressures and political uncertainty", the analysis moderates. "Although the revised forecasts give reason for optimism, there is still considerable uncertainty about the trajectory of the Covid-19 Delta variant, which poses particularly large risks for countries that have made less progress in immunisation and for economies that are heavily dependent on international tourism," adds Beata Javorcik, the EBRD's chief economist.

Egypt, a special case in the world

The EBRD's regional economic outlook details the cases of Egypt, Jordan, Lebanon, Morocco and Tunisia.

"Egypt is one of the few countries in the world to have recorded economic growth during the year 2020 (editor's note: + 1.5%)," the study points out. It should continue in 2021 (+4.2%) and in 2022 (+5.2%). Over the first three quarters of the 2020-2021 fiscal year, this growth reached an average of 1.9% thanks to wholesale and retail trade, agriculture, telecommunications and construction, which came to compensate for a "sluggish" manufacturing activity and weak tourist revenues.

After a first downturn in thirty years in 2020 (-1.6%), Jordan continues to rely on the good results of its financial and agricultural sectors to limit the damage, while tourism, the main provider of growth, has fallen by 76%. The country is expected to record an increase in its GDP estimated at 1.5% in 2021 and 2.2% in 2022.

Negative growth forecast for Lebanon in 2021

The recovery in Europe favours Moroccan exports (photo: F.Dubessy)
The recovery in Europe favours Moroccan exports (photo: F.Dubessy)
Lebanon stands out in this outlook for the SEMED region. Falling tourism, declining capital inflows, falling export demand, the "derailed" implementation of structural reforms, continue to undermine the country. Plunged into social movements and a political crisis, its GDP fell by 25% in 2020 after a -6.7% in 2019. Inflation reached 85% on average in 2020 and was around 140% year-on-year in the first months of 2021. The EBRD fears a further 5% contraction in GDP in 2021, caused by "the ongoing economic crises, the government's inability to borrow on international markets, delays in implementing critical reforms and the drying-up of financial resources".

However, if the programme supported by the International Monetary Fund (IMF) can finally be put in place, the bank's economists estimate that growth could return in 2022 at a rate of 5%.

The 6.3% decline of the Moroccan economy in 2020 would be a bad memory. In 2021, the Cherifian Kingdom should experience a growth of 4.5% thanks to a good vaccination campaign allowing a return to strong tourist numbers, as well as the expected recovery in Europe, its main trading partner, and the strengthening of exports. In 2022, the EBRD is counting on an expansion rate of 3.5%.

Tunisia (-8.8% of GDP in 2020) will also recover, but more slowly, as shown by the continued slowdown in the first quarter of 2021 with a 3% year-on-year decline. The EBRD study however envisages a growth of 2.7% in 2021 and 2.9% in 2022, favoured by the good weather conditions and their impact on agriculture, and particularly on olive oil production.

Read the EBRD study on the regional economic outlook

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