The EBRD revised upward its 2014 GDP growth forecast on the four MENA countries where it is currently investing to an average of 3.0%, according to the latest regional economic outlook report released on May 14. The aggregate GDP growth for 2014 was upped from 2.6% in January this year. Egypt is the main gainer with GDP growth now expected to reach 2.5% this year, up from a 1.8% projection in January.
The EBRD underscored that the four countries in the southern and eastern Mediterranean (SEMED) where it invests are less likely to be affected by the Russia-Ukraine crisis. But, any reduction in grain and wheat exports from Ukraine could fuel costs for Egypt, a major importer, the EBRD warned.
The EBRD said growth in the SEMED region is still being dented by both external and domestic pressures, like delayed reforms and volatile security conditions in Egypt and the impact of regional tensions on Jordan. The EBRD, however, underscored the significant political progress in Tunisia that is supporting the economic outlook.
In Egypt, economic performance will depend on the still unsolved domestic and political situation. Stalled reforms and ongoing volatile security conditions are weighing on the economy, despite financial assistance from the GCC, the EBRD said. The USD 15bn pledged so far will help cover Egypt’s external financing needs in the short term. The GCC aid has also allowed the government to announce two stimulus packages of USD 4.3bn each (1.6% of GDP each), mostly for infrastructure projects, the EBRD noted. However, the impacts of the stimulus packages have yet to be felt, it added.
The fiscal deficit remains large and continues to widen, which along with high and persistent inflation, are key macroeconomic challenges, the EBRD warned.
In Jordan, economic activity remains sluggish, sharply impacted by the Syrian conflict which has disrupted trade and tourism and resulted in an influx of over half a million refugees, the EBRD underscored. The refugees’ crisis is putting a strain on public services and finances and labour market conditions, the EBRD noted.
In Morocco, the GDP growth 2014 is expected to moderate slightly to 4.2% from 4.3% a year earlier mainly due to the strong crop harvest last year. GDP growth will pick up to 5% in 2015 as the non-agricultural sector strengthens with an expected recovery in the Eurozone.
Tunisia’s economy will benefit from major milestones in political transition that will likely have positive spill-overs on the economy. Growth is expected to pick up to 3.4% in 2014 from 2.7% the year before and to 4.7% in 2015 on the back of stabilising domestic conditions and a gradual recovery in external demand from the Eurozone.
As of January 2014, the EBRD figures and forecasts for Egypt's real GDP reflect the fiscal year, which runs from July to June. For ease of comparison, the figures displayed in the table reflect what the SEMED average would have been using fiscal-year rates in the October 2013 forecasts, the EBRD said.
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