EBRD cuts SEMED GDP growth to 2.8% in 2013, Tunisia main loser

By bne IntelliNews November 11, 2013

The EBRD revised down its 2013 GDP growth outlook on the four MENA countries where it is currently investing to an average of 2.8%, according to the latest economic outlook report released on November 11. The aggregate GDP growth for 2013 was cut down from 3.0% in May. In the region’s largest economy, Egypt, the political turmoil and the curfew imposed by the interim government have significantly dented business activity, the EBRD said. Domestic policy and political uncertainties also weigh on growth prospects in Tunisia. The four MENA countries continue to face adverse external conditions, the EBRD noted. But external bilateral or IFI financial support have been critical to help contain economic and political stress, the bank underscored.

Tunisia is the main loser as the EBRD revised down its 2013 GDP growth forecast to 3.2% from 3.8% in May. Egypt’s GDP growth forecast was slightly trimmed to 1.9% from the previous 2.0% while that of Jordan was left unchanged at 3.0%. Morocco will remain the best performer in 2013 despite trimming its GDP growth to 4.8% from 5.0% in May.

The EBRD warned that the political turmoil in Egypt following the ouster of President Morsi in July 2013 has weighed heavily on the economy, leading to a retrenchment of overall economic performance. The curfew imposed by the interim government has significantly impacted business activity as the country remains in a state of emergency. Real GDP will remain muted, rising just 1.9% in 2013 before quickening to 3.2% in 2014, the EBRD forecasts. Downside risks linked with heightened political uncertainty outpace by far those on the upside, the EBRD noted.

Foreign aid inflows will temporarily support the Egyptian economy but they cannot replace the required reforms to address the economy’s unresolved fiscal and external pressures, according to the EBRD.

As to Jordan, the country’s economic performance remains weak amid continued regional turmoil, the EBRD said. Jordan’s forecast GDP growth of 3.0% in 2013 is well below the average growth rate of 6.0% recorded over the last decade. The conflict in Syria has also disrupted trade and resulted in an influx of over 500,000 refugees (estimates including non-registered refugees are higher), the EBRD said. Syrian refugees continue to strain public service provision, public finances, and labour market conditions, the EBRD warned.

The recent political developments in Egypt, particularly in Sinai, might derail the normalisation of natural gas supply to Jordan, thus posing a downside risk to external balance, the EBRD said. Leading indicators point to further weakening of economic activity as reflected by the subdued performance of industrial production and tourism, according to the EBRD.

The EBRD is upbeat on Morocco’s outlook as output continued to improve in 2013. This is mainly due to the strong recovery in the agricultural sector (which accounts for around 13% of GDP and 40% employment). Growth in non-agricultural production, however, slowed to 1.9% in Q2 from 4.5% a year earlier. Morocco’s overall growth will accelerate to 4.8% in 2013 the EBRD forecasts but will likely slow to 4.0% in 2014 as agriculture growth normalises. Meanwhile, inflation remains under control, and Morocco enjoys the lowest rate in SEMED, the EBRD said.

Looking at Tunisia, the recent political and security turmoil has impacted economic performance. Real GDP grew by 3.2% in the second quarter of 2013, up from 2.6% in Q1, regaining momentum following the killing of an opposition leader in February. But the latest political crisis sparked by the assassination of another opposition leader in July will likely drag down economic performance in the third and fourth quarters, the EBRD warned.

Renewed protests and labour strikes have dented economic activity, mainly in tourism and manufacturing, the EBRD said, expecting an overall GDP growth of 3.2% in 2013. The balance of payments remains under pressure, with tourist receipts severely dented while the fiscal deficit target has been missed, the EBRD noted.

  2012 2013 (F) 2013-May (F) 2014 (F) 2014-May (F)
Morocco 2,7% 4,8% 5,0% 4,0% 5,2%
Tunisia 3,7% 3,2% 3,8% 4,0% 4,3%
Jordan 2,7% 3,0% 3,0% 3,4% 3,4%
Egypt 3,3% 1,9% 2,0% 3,2% 3,6%
Average 3,1% 2,8% 3,0% 3,5% 4,1%
Source: EBRD          

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