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WFA predicts rising inflation rates in Arab countries in 2022

Written by Eric Apim on Friday, April 22nd 2022 à 15:51 | Read 404 times

The Arab Monetary Fund predicts rising inflation in the twelve Arab countries, but strong growth driven by oil-producing states.

AMF predicts higher inflation rates in Arab countries in 2022
AMF predicts higher inflation rates in Arab countries in 2022
ARAB COUNTRIES. In its "Arab Economic Outlook" report, published on 19 April 2022, the Arab Monetary Fund (AMF)* warns of a rise in inflation for the year 2022 and increases in the price of agricultural raw materials, industrial products and energy. This sixteenth edition reveals that the average inflation rate will be around 7.5% in 2022 in the Arab countries, up from 5.7% in 2021. However, an improvement is expected in 2023 with a forecast of 7%.

According to the WFA, the ingredients responsible for these high inflation levels are rising levels of aggregate demand, challenges facing global supply chains, rising prices of agricultural, industrial and energy products, as well as the depreciation of some Arab currencies against major currencies.

The report forecasts a 5% growth in GDP in 2022, thanks to the increase in hydrocarbon production (+40% for oil in the first quarter of 2022 and +112% for gas on an annual basis) and its prices on the international markets. In the producing countries alone, the increase will reach 5.8% in 2022 (compared with 3.1% in 2021) before retracting to 3.6% in 2023. This windfall will make it possible to generate a public budget surplus for the first time since 2014 for the Gulf Cooperation Council (GCC), which groups together six Arab and Muslim monarchies of the Persian Gulf**. As a result, the public budget deficit in all Arab countries will decrease to 2.4% of GDP in 2022 (4.6% in 2021).

396 billion in stimulus measures

Other Arab oil exporting countries are expected to benefit from the planned increases in oil production quantities under the OPEC+ agreement and higher world oil and gas prices, which will raise the growth rate of this group to 4.6% in 2022 from 3, 3% in 2021, while the growth rate is expected to decline to 3.9% in 2023 "due to domestic conditions affecting growth and the challenges faced by this group of countries in terms of sustaining business environments and increasing their attractiveness," the report says.

The hydrocarbon importing states will experience a more moderate growth rate, at 3.7%, compared to 2.5% in 2021. But the WFA expects a gradual improvement in pressures on public budgets and balances of payments due to the expected decline in commodities in 2023. It is therefore targeting growth of up to 5% for these countries next year.

Stimulus measures to support economic recovery - $396bn in total in Arab countries over the period 2020-2022 - will also contribute to this overall growth in the twelve states concerned. However, it will be smaller in 2023 (4%), "due to the decline in global demand, the gradual withdrawal of stimulus measures and the expected fall in commodity prices," the study says.

The current account surplus of Arab countries as a group will increase in 2022 to about $186.6 billion, an increase of 44.1%, to reach about 6.4% of Arab countries' GDP. In 2023, this surplus is expected to decrease to $149.6bn, representing about 4.9% of GDP.

* Founded in 1976 and operational since 1977, the Arab Monetary Fund has 22 members: Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, Yemen.

** Created in 1981, the Gulf Cooperation Council includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. In 2011, the GCC had proposed to Morocco and Jordan to join it, before finally withdrawing its offer.

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