Arab Monetary Fund releases The Fifteenth Edition of the Arab Economic Outlook Report

The Arab Monetary Fund raises its forecast for the economic growth of Arab countries in 2022 to 5.2 percent, reflecting the expected increase in oil production in some major Arab oil exporters and the positive impact of implemented economic reforms

Inflation rates are expected to record relatively high levels in some Arab countries in 2021, as a reflection of the local and global inflationary pressures, while those pressures are expected to recede in 2022

In line with its continuous efforts to support the decision-making process in Arab countries, the Arab Monetary Fund (AMF) has released the Fifteenth edition of the Arab Economic Outlook Report, including updated forecasts for growth and inflation in Arab Economies for 2021 and 2022.

The report indicated that the global economy faced significant challenges in 2021 as the world economies intensified their efforts to support post-Covid-19 economic recovery and mitigate its effects on individuals and companies, especially in light of the continued spread of the virus and its variants in many parts of the world. In this context, estimates of international institutions indicate that the global economy is expected to grow by around 5 to 6 percent in 2021, amid divergent paths of economic recovery between developed and developing countries based on the progress achieved in terms of vaccination campaigns and the available fiscal space to support the recovery. While advanced economies adopted generous stimulus packages in 2021, developing countries faced tight fiscal space, forcing them to accumulate debts to support economic activities.

In light of huge fiscal stimulus packages adopted by a number of advanced economies, global demand and international trade witnessed a remarkable acceleration during 2021, which imposed pressures on global economic resources. These pressures came while the supply side and international value chains were impacted by restrictions imposed to contain the spread of the virus. The acceleration of the global demand and international trade resulted in a wave of global inflationary pressures. Although these pressures are thought to be temporary and are expected to fade gradually with the reopening of the global economies, they might lead to a quick tightening of monetary policy and interest rates hikes in advanced economies.

These developments will impose many risks on developing countries and emerging market economies during the fourth quarter of 2021 and 2022, especially those with elevated external borrowing levels and countries that suffer from high internal and external economic imbalances. Accordingly, some developing countries and emerging market economies could witness capital flight and financial crises that might weigh on the global recovery. On the other hand, global debt has spiked to reach USD 296 trillion by the end of the second quarter of 2021, representing about 353 percent of global GDP according to the International Institute of Finance, which could trigger debt crises similar to those witnessed in the eighties of the last century.

Accordingly, the main policy priorities for governments all over the globe are to reach tangible progress in the vaccination campaigns, strengthen fiscal space to support economic recovery, and implement needed reforms to increase economic resilience, meet national obligations to reduce carbon emissions, and face risks associated with high debt levels and financial fragilities.

Within this context, The Arab governments intensified their efforts during 2021 to accelerate the implementation of national vaccination campaigns to ensure health preparedness to confront the Covid-19 Pandemic. Accordingly, the percentage of vaccinated people increased in some Arab countries to levels ranging between 40 and 86 percent, which means that these countries are close to reaching herd immunity levels.

This progress encouraged Arab governments to gradually ease restrictions and precautionary measures starting from the second quarter of 2021, which supported the recovery of several economic sectors, especially those with substantial direct and indirect linkages with other economic sectors. The most important are exports, tourism, building and construction, internal trade, manufacturing, pharmaceuticals, communications, and information technologies.

In addition, several factors supported the economic recovery of Arab countries in 2021, at the top of which, the recovery of the global demand and international trade, the increase in the global demand for energy, and the implementation of fiscal stimulus packages totaling USD 341.5 billion since the start of the Pandemic till the end of September 2021.

Accordingly, the AMF expects the economic growth rate of the Arab countries as a group to reach 2.7 percent in 2021. Growth of Arab-oil exporting economies is expected to reach 2.8 percent reflecting the increase in the international oil prices by 63 percent from the beginning of 2021 till Mid-October, the tangible progress related to vaccination campaigns, and the continuations of fiscal stimulus packages in some Arab oil-exporters with appropriate fiscal space.

On the other hand, the economies of the Arab oil-importers are expected to grow by 2.5 percent, driven by the external demand, the increase in workers’ remittances, the recovery of the tourism sector, and the positive impact of the implemented economic reforms.

The pace of economic recovery for Arab countries is expected to strengthen in 2022 to reach 5.2 percent as a result of a number of factors, foremost of which is the expected rise in the oil production of major Arab oil-exporting countries within the framework of the “OPEC +” agreement starting from May 2022.

Within this context, the economies of Arab oil exporters are expected to grow by 5.5 percent. On the other hand, the economies of the Arab oil-importing countries are expected to grow by 4.6 percent next year. This higher growth pace is attributed to the anticipated continued recovery of the global demand and the revival of several important economic sectors, mainly tourism and exports, due to the reopening of the national economies in line with further progress in vaccination campaigns expected next year.

At the country level, five Arab countries are expected to fully recover from the repercussions of the Pandemic in 2021, nine in 2022, while the recovery pace will likely extend beyond 2022 in the rest of Arab countries.

In terms of price levels, it is expected that inflation rates in some Arab countries will record relatively high levels in 2021, reflecting several factors, the most important of which are:

–   The rise in global food and energy prices.

–   The depreciation of some Arab currencies.

–   Increases in money supply.

–   The increase in the prices of agricultural products resulted from climate change in some Arab countries.

Accordingly, the inflation rate of Arab countries as a group – including Lebanon and Sudan, which witnessed relatively significant increases in inflation rates during the year 2021 – is expected to reach about 13.2 percent this year. The inflation rate is expected to recede to 6.1 percent in 2022 due to the easing of the current bottlenecks affecting supply chains, the anticipated increases in the supply of goods and services, and the improvement in the internal conditions in some Arab countries. However, when excluding the inflationary pressures in the two countries mentioned earlier, the Arab economies’ inflation rate is expected to record a moderate level hovering around 3.3 percent and 3.0 percent in 2021 and 2022, respectively, amid divergent inflation rates among different sub-groups of Arab countries.

The full version of the report is available at: