The International Monetary Fund (IMF) forecasted on Thursday that growth in the Middle East and North Africa region is expected to rebound to 4% next year, but will hinge on a phase out of oil production cuts and headwinds subsiding, including from conflicts.
The IMF also stated that any discussions to further increase the overall program size in Egypt are premature.
At the launch of the IMF’s latest Regional Economic Outlook, Jihad Azour, the Fund’s director for the Middle East and Central Asia department, told reporters in Dubai that “the economic outlook is fraught with risks.
“Hence, our 2025 forecasts come with important caveats,” he said.
Growth in the region will remain “sluggish” at 2.1% in 2024, lower than earlier projections as geopolitical and macroeconomic factors weigh.
For 2024, growth is projected at 2.1%, a downgrade revision of 0.6% from the April WEO forecast, and this is largely due to the impact of the conflict and the prolonged OPEC+ production cuts.
To the extent that these gradually abate, the IMF anticipates stronger growth of 4% in 2025. However, uncertainty about when these factors will ease is still very high, Azour said.
Meanwhile, the economic growth of MENA oil-exporting countries is expected to increase from 2.3% in 2024 to 4% in 2025, if the voluntary oil output cuts end.
The IMF has estimated that growth among GCC members will reach 8.1% this year, accelerating to 2.4% next year compared to 4.2% and 9.4% in its previous forecast in April. Inflation rates are projected to average 8.1% this year and 9.1% next year.
In MENA emerging markets, growth is also expected to accelerate from 2.4% this year to 3.8% in 2025, assuming a decline in the intensity of conflicts.
Similarly, improved growth in low-income countries (LICs) depends, to a large extent, on the easing of conflict in Sudan, according to Azour.
He explained that the Fund’s forecasts were prepared in mid-September and therefore do not reflect the impact of recent developments in the region.
“We are closely monitoring the situation and assessing the potential economic impacts. Overall, the impact will depend on the severity of any potential escalation,” Azour said.
He noted that the conflict could impact the region through multiple channels.
“Beyond the impact on output, other key channels of transmissions could include tourism, trade, potential refugee and migration flows, oil and gas market volatility, financial markets and social unrest,” Azour added.
He also warned that concern is also high about the possibility of prolonged conflict in Sudan, increased geoeconomic fragmentation, volatility in commodity prices, especially for the oil exporting countries, high debt and financing needs for emerging markets and recurrent climate shocks.
Egypt
Azour said the IMF’s $8 billion program for Egypt is making progress, stating that any discussions to further increase the overall program size are premature.
Asked whether he was confident Egypt would meet its program targets, Azour said that economic conditions in Egypt were expected to improve and that it was too early to discuss any changes to its size.
“The program is moving in the right direction and is gradually achieving its targets, both in terms of growth recovery and gradual decline in inflation, and a normal functioning of the foreign exchange market,” Azour said.
“Building buffers or strengthening the buffers of Egypt is the first line of defense that could help the Egyptian economy withstand any additional external shock,” he said.
Azour also said that Egypt was expected to save almost $800 million over the next six years on the back of recent reforms of the IMF's charges and surcharges policy, which would provide additional support.
The IMF's Egypt team is scheduled to travel to Cairo in November to prepare for the third review of the program. Managing Director Kristalina Georgieva also plans to visit to reaffirm the fund's support for Egypt.
