The International Monetary Fund (IMF) said the Russian invasion of Ukraine is significantly affecting the growth prospects of the developing economies in the Middle East and North Africa (MENA), while oil-exporting countries benefit from higher crude prices.
In its "Regional Economic Outlook: the Middle East and Central Asia," the IMF said that growth in the GCC countries is projected to accelerate from 2.7 percent in 2021 to 6.4 percent in 2022, an upgrade of 2.2 percentage points from October, mainly due to upward revisions for Saudi Arabia.
Despite an upgrade, inflation is expected to peak at 3.1 percent in GCC countries in 2022, after 2.2 percent inflation in 2021.
The report predicted that the gross domestic product of Saudi Arabia, the largest economy in the region and one of the largest exporters of oil in the world, will grow by 7.6 percent in 2022.
The region's growth is expected to moderate from 5.8 percent in 2021 to 5.0 percent in 2022, still, an upward revision of 0.9 percentage point from October, noting that mirroring the diversity of its economies, the recovery in the MENA region is expected to be uneven.
IMF Middle East and Central Asia Director Jihad Azour told a news conference that low-income countries in the region would be the hardest hit because of their limited reserves and their dependence on wheat from Ukraine and Russia.
Azour explained that the region's economy showed signs of a strong recovery before the Ukraine crisis, noting that the only negative side was inflation, which started rising in 2021 and remained high.
He explained that inflation averaged 14.8 percent in 2021 and is expected to remain at 13.9 percent this year, noting that the conflict in Ukraine "directly and indirectly affects" the region with an increase in energy and food prices in particular.
"Tackling rising global food and energy prices is vital. While allowing domestic prices to increase gradually, countries should compensate vulnerable households," he said.
Azour stated that the increase in oil prices supports the recovery of oil exporters' economies, especially the Gulf countries with high COVID-19 vaccination rates and which run various economic recovery programs.
According to the report, Low-Income Developing Countries (LIC) like Yemen, Sudan, Mauritania, Somalia, and Djibouti, are expected to experience inflation of 141 percent in 2022, with a 1.1 percent growth only.
Emerging Market and Middle-Income Countries (EM&MI), such as Egypt, Jordan, and Morocco, may see a more robust growth of 4.4 percent, according to the Fund's forecasts.
The Fund warns that these countries have limited policy space to offset these new challenges and underlying fragilities.