Middle East and North Africa Macro Poverty Outlook Country-by-country Analysis and Projections for the Developing World Spring Meetings 2022 © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Middle East and North Africa Algeria Kuwait Saudi Arabia Bahrain Lebanon Syrian Arab Republic Djibouti Libya Tunisia Egypt, Arab Republic Morocco United Arab Emirates Iran, Islamic Republic Oman Yemen, Republic Iraq, Republic Palestinian territories Jordan Qatar MPO 1 Apr 22 to a private sector-led growth and job creation model a developmental priority. ALGERIA Key conditions and Private firms are small, of low productiv- ity, and largely informal, amid substan- challenges tial State presence in productive sectors, a high regulatory burden, and limited ac- Table 1 2021 Population, million 44.7 The Algerian economy remains dominated cess to credit and skills. The Plan argues GDP, current US$ billion 168.0 by the oil and gas sector, which accounted for reinforcing macroeconomic stability, GDP per capita, current US$ 3761.1 for 19% of GDP, 94% of product exports rationalizing spending, reducing imports a 5.5 and 40% of budget revenues between 2015 and boosting non-hydrocarbon exports, National poverty rate a 0.4 and 2020. Over the past 15 years, however, and for significant improvements to the International poverty rate ($1.9) a 3.7 declining investments contributed to a de- business environment, including through Lower middle-income poverty rate ($3.2) a 27.6 Gini index cline in oil production and a stagnation in the reform of public banks and state- b 111.3 School enrollment, primary (% gross) natural gas production, while rising do- owned enterprises, as well as the adop- b 76.9 Life expectancy at birth, years mestic consumption has led to a steeper tion of a new Investment Law. The specif- Total GHG Emissions (mtCO2e) 221.7 fall in export volumes. ic timeline for its implementation remains Source: WDI, Macro Poverty Outlook, and official data. Since 2015, the current account and overall to be determined. a/ Most recent value (2011). budget deficits have averaged 13% and 11% b/ WDI for School enrollment (2020); Life expectancy (2019). of GDP, respectively, leading to a marked decline in international reserves, currency depreciation, import compression policies, Recent developments Increasing oil and gas demand and prices as well as debt monetization. Real public spending also stagnated, contributing to a Led by the oil and gas sector, the economy led to a strong rebound in hydrocarbon pro- slowdown in non-hydrocarbon sectors, and expanded by 3.9% year-on-year during the duction and exports in 2021, sharply re- average annual real GDP growth fell to 1.1% first nine months of 2021, after contracting ducing fiscal and external financing needs. in 2017-2019, causing GDP per capita in PPP by 5.5% in 2020. The recovery in hydrocar- The recovery in the non-hydrocarbon seg- terms to return to its 2014 levels. Nonethe- bon output was driven by surging Euro- less, non-monetary poverty declined be- pean gas demand and easing OPEC pro- ments of the economy remains incomplete, tween 2013 and 2019, amid improvements in duction quotas. Low rainfall contributed however, while inflation is rising. Looking education, health, and material outcomes. to a stagnation in agricultural output and beyond the current hydrocarbon windfall, The COVID-19-induced recession exacer- services growth was subdued, but indus- accelerating the implementation of the bated growth challenges and macroeco- trial and construction activity supported Government’s structural reform agenda nomic imbalances, reinforcing the impetus growth. As of September 2021, non-hydro- for reform. The Government notably took carbon GDP was still 3% below its pre- will be essential to accelerate the recovery, steps to attract foreign investment by is- pandemic level. On the expenditure side, reduce Algeria’s reliance on hydrocarbon suing a new Hydrocarbon Law, as well as private consumption and investment re- exports and sustainably reduce macroeco- lifting restrictions on foreign ownership of turned to their pre-pandemic levels, while nomic imbalances, diversify the economy, domestic firms in several sectors. inventories are yet to recover. Meanwhile, the September 2021 Govern- The estimated overall budget deficit nar- and create private sector jobs. ment Action Plan has made the transition rowed from 12% in 2020 to 3.5% of GDP FIGURE 1 Algeria / Crude oil prices and trade balance FIGURE 2 Algeria / GDP components, production side Billion US$ US$ per barrel Real GDP index (2019 =100) 4 120 110 Current account balance Price of Algerian petroleum 105 2 100 100 0 80 95 -2 60 90 Agriculture -4 40 Hydrocarbons 85 Industry -6 20 Construction 80 Commercial services GDP -8 0 75 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2019 2020 2021e 2022e 2019 2020 2021 Sources: Bank of Algeria and oilprice.com. Source: National Statistical Office and World Bank staff estimates. MPO 2 Apr 22 in 2021, driven by rising oil revenues, poverty estimates and estimating infla- In 2022, the fiscal position is expected to an incomplete recovery in spending and tion’s impact on well-being. improve markedly amid surging energy despite significant financing support to Algeria’s current account deficit shrank by prices, sustained depreciation, and a re- the national pension fund. Estimated oil 74% in 2021, amid a 70% increase in the covery in tax revenues, offsetting the mod- revenues surpassed pre-pandemic levels value of hydrocarbon exports and a muted erate increase in public spending. The cur- to reach 15% of GDP in 2021, while recovery in imports, and despite rising im- rent account balance is expected to register tax revenues remained 1.7 percentage port prices. Accordingly, foreign exchange a surplus, aided by high hydrocarbon points of GDP below pre-crisis, owing reserves stabilized, at around 11 months of prices and despite a moderate recovery in to subdued firm profitability and im- imports of goods and services. input and equipment imports, consistent ports. Budget spending only recovered with higher investment. Over the medium- moderately, absent a marked recovery term, budget and external deficits are ex- in public investment. Public debt is esti- pected to reappear and widen amid de- mated to have increased from 52 to 61% Outlook clining hydrocarbon export volumes and of GDP in 2021, with banks purchas- prices, and public debt to stabilize at ing large amounts of Treasury securities GDP is expected to continue to rebound around 50% of GDP. as part of a state-owned enterprise debt and return to its 2019 level in 2022, despite The economic consequences of the Russ- buyback program supported by Central low rainfall and therefore weak agricultur- ian-Ukrainian war and associated sanc- Bank financing. al production. Aided by a rebound in pub- tions could further elevate hydrocarbon Broad money grew by 14% in 2021 as lic and energy investment, investment prices and improve Algeria’s fiscal and hydrocarbon deposits increased and growth is expected to outpace that in con- external balances despite rising food im- COVID-19 policies to ease liquidity con- sumption, more muted due to a gradual la- port prices. On the other hand, large ditions remained in place, but private sec- bor market recovery and the effect of high macroeconomic imbalances could reap- tor credit grew only by 3%. Inflation ac- inflation on real consumer income. Hydro- pear if global hydrocarbon prices were celerated markedly in 2021, led by a carbon production will increase as OPEC to decline. Ultimately, sustaining growth 10.1% increase in food prices despite sig- quotas are eased and demand for Algerian and enhancing economic resilience will nificant food subsidies, exacerbating the gas benefits from European diversification hinge on the pace of implementation of situation of the vulnerable population. away from Russian supply, before resum- structural reforms and their ability to fos- The household survey under implemen- ing a gradual decline, offset by modest ter economic diversification, private sec- tation will allow for updating the 2011 non-hydrocarbon economic growth. tor-led growth and job creation. TABLE 2 Algeria / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 1.0 -5.1 3.9 3.2 1.3 1.4 Private Consumption 2.1 -3.0 2.1 2.0 2.0 2.2 Government Consumption 1.9 -0.3 -0.9 0.1 0.1 0.0 Gross Fixed Capital Investment -3.6 -5.2 3.5 5.7 3.1 4.6 Exports, Goods and Services -6.0 -11.4 11.1 4.3 -1.2 -2.0 Imports, Goods and Services -6.9 -15.6 -3.9 3.0 1.9 2.4 Real GDP growth, at constant factor prices 1.0 -4.7 3.9 3.2 1.2 1.3 Agriculture 2.7 1.3 0.2 0.9 1.8 1.3 Industry -1.6 -7.5 7.0 4.2 1.3 1.3 Services 3.4 -3.4 1.7 2.6 0.9 1.3 Inflation (Consumer Price Index) 2.0 2.4 7.2 7.1 7.0 7.0 Current Account Balance (% of GDP) -9.9 -12.6 -2.8 4.7 -0.2 -4.0 Fiscal Balance (% of GDP) -9.6 -12.0 -3.5 0.7 -0.8 -2.2 Debt (% of GDP) 45.6 52.1 61.2 51.8 50.5 49.9 Primary Balance (% of GDP) -9.0 -11.0 -2.9 1.3 0.0 -1.2 GHG emissions growth (mtCO2e) 2.3 -2.4 1.4 3.1 2.0 1.7 Energy related GHG emissions (% of total) 64.4 64.2 64.4 65.1 65.4 65.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 3 Apr 22 adherence to consolidation efforts, and reducing the fiscal risks from off-budget BAHRAIN Key conditions and expenditures will help to improve Bahrain’s outlook. Advancing structural challenges reforms including these related to in- vesting in renewable energy and digital Table 1 2021 The Bahraini economy is relatively diver- solutions, would attract foreign invest- Population, million 1.7 sified, reflecting the authorities’ consider- ment, and increase employment oppor- GDP, current US$ billion 38.8 able efforts to boost manufacturing, refin- tunities, particularly among women and GDP per capita, current US$ 22823.5 ing, tourism, and trade. Nevertheless, the youth. While soaring oil prices caused by a 98.0 School enrollment, primary (% gross) hydrocarbon sector remains a strong dri- the economic consequences of the war in a 77.3 ver of the economy accounting for 20 per- Ukraine are expected to further strength- Life expectancy at birth, years Total GHG Emissions (mtCO2e) 52.4 cent of GDP and over 60 percent of to- en Bahrain’s fiscal and external balances, Source: WDI, Macro Poverty Outlook, and official data. tal revenues, thereby making the econo- there is a risk that strong fiscal buffers a/ Most recent WDI value (2019). my extremely vulnerable to energy prices might lead to an increase in already high shocks. As such, the pandemic and re- off budget spending. lated oil price shock have exacerbated The government has made efforts to re- The economy is gradually picking up as Bahrain’s large pre-existing fiscal and ex- duce unemployment by promoting the hir- ternal imbalances, with a surge in public ing of Bahrainis in the private sector pandemic pressures fade, non-oil econo- debt levels and gross financing needs. through incentives to firms and increasing my recovers, and hydrocarbon production Bringing the fiscal position to a balance the local skills base to gradually lower un- increases. The fiscal deficit remains high by 2022 according to 2018 Fiscal Balanced employment among nationals as well as as emergency crisis-spending persists but Program (FBP) proved challenging due to the demand for foreign labor. is expected to narrow gradually. The ex- the pause of fiscal consolidation caused by the pandemic and insufficient fiscal ternal balance will noticeably improve. adjustment measures. The debt to-GDP-ratio is expected to re- At end-2021, the country announced new Recent developments main elevated during the forecast period measures to curve the fiscal deficit, includ- to meet fiscal needs. Downside risks arise ing the doubling of the VAT rate to 10 per- Bahrain’s economy is gradually emerging cent from January 2022 and actions to re- from the pandemic-caused recession. Lat- from oil price volatility, and insufficient duce the deficit related to electricity and est official data indicate that the economy fiscal adjustment that could worsen fiscal water authority. grew by 1.5 percent (y/y) in the first nine and external positions and intensify pres- However, challenges remain. Delays in re- months of 2021 (9M-2021), after nearly a 5 sure on already high public debt, thereby forms and persistent off-budget spending percent contraction in 2020. The rebound may imply higher debt and financing was mainly underpinned by 2.3 percent threating macroeconomic sustainability. needs. Additional efforts are needed to un- growth in non-hydrocarbon aided by a leash more fiscal space to meet the in- strong expansion in the transportation and creased challenges posed by climate communication sector—one of the hard- change and an expected long-term decline est-hit by the pandemic—as well as in- of demand for fossil fuels. On the upside, creased agricultural and fishing activity. FIGURE 1 Bahrain / Real annual GDP growth FIGURE 2 Bahrain / General government operations Percentage change Percent of GDP Percent of GDP 6 0 40 -2 35 4 -4 30 2 -6 -8 25 0 -10 20 -2 -12 15 Hydrocarbon GDP -4 -14 Overall fiscal balance 10 Non-hydrocarbon GDP -16 Total revenus (rhs) -6 5 Real GDP -18 Total expenditure (rhs) -8 -20 0 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 Sources: Bahrain authorities, World Bank, and IMF staff projections. Sources: Bahrain authorities, World Bank, and IMF staff projections. MPO 4 Apr 22 The hydrocarbon sector contracted by al- According to the Labor Market Regulatory fiscal consolidation. The expansion of the most 2 percent (y/y) in the same period. Authority, total employment in Q1-2021 Sitra oil refinery and development of the Growth is estimated to have registered fell with respect to 2020, driven by lower Khaleej al Bahrain shale oil project will 2.6 percent by end-2021 driven by the foreign employment. Data from the Social support the growth outlook going for- non-hydrocarbon activities. Inflation re- Insurance Organization indicate a recov- ward. Inflation is expected to increase to mains in negative territory, averaging at ery in Bahraini employment by the end of 2.5 percent in 2022, fueled by the doubling -0.6 percent, due to weaker demand and 2021. The number of Bahraini employees of the VAT rate to 10 percent and a contin- lower prices for rents compounded by increased by 2.7 percent in Q4-2021 (y/y), ued recovery of domestic demand. the departure of expatriates caused by 2.9 percent in the private sector and 2.3 While the pandemic related spending con- the pandemic. percent in the public sector. The number tinues, the fiscal deficit is projected to con- The fiscal deficit is estimated to have nar- of foreign employees has continued to de- tinue narrowing over the medium term, rowed, from over 17 percent of GDP in crease since Q4-2020 (y/y). supported by high hydrocarbon revenues 2020 to almost 11 percent in 2021, thanks and implementation of fiscal adjustment to improved revenue from higher oil and measures under the FBP. Yet public debt aluminum prices despite high pandemic- is projected to remain above 120 percent related emergency spending. Public debt Outlook of GDP throughout 2022-24. Adherence to remained elevated at above 120 percent of the FBP accompanied by higher hydrocar- GDP, although the better fiscal outcome Bahrain’s economic outlook hangs on oil bon and non-hydrocarbon revenues, helped to lower it by 6 percentage points. market prospects, pandemic conditions, would improve the fiscal outlook. The external sector exhibited a strong per- and reform implementation. Growth is Higher exports from oil and aluminum formance in the first 9M-2021 driven by sol- projected to accelerate to 3.5 percent in along with the revival of the tourism sector id rebound in both oil and non-oil exports, 2022, boosted by the surging energy prices are forecast to keep the current account in including service receipts, aided by the re- caused by the economic consequences of surplus at nearly 5 percent of GDP in 2022, laxation of COVID-19 restrictions. As a re- the war in Ukraine. Recovery of the non- but to decelerate in the 2023-24 given high sult, the current account balance is estimat- oil economy is likely to continue thanks debt service payments and increased cap- ed to switch into a surplus of over 4 percent to successful vaccination rollout and fur- ital imports to boost oil production. The of GDP by end-2021, mitigating pressures ther relaxation of movement restrictions. anticipated external account surplus will on foreign reserves, which doubled to US$4 Over the medium-term, however, non-oil help mitigate pressures on the foreign ex- billion in 2021, up from US$2 billion in 2020. economic activity would be dampened by change reserves. TABLE 2 Bahrain / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 2.1 -4.9 2.6 3.5 3.1 3.1 Private Consumption 0.5 -4.4 3.1 3.7 3.2 2.9 Government Consumption -1.5 -2.1 2.3 1.1 -0.8 -1.3 Gross Fixed Capital Investment -2.8 -3.8 2.2 3.7 3.9 4.0 Exports, Goods and Services 0.4 -2.5 5.5 6.2 6.3 6.5 Imports, Goods and Services -5.6 -0.7 6.2 6.4 6.4 6.5 Real GDP growth, at constant factor prices 2.1 -4.9 2.6 3.5 3.1 3.1 Agriculture -1.0 0.1 2.2 2.4 2.7 2.6 Industry 2.3 -1.2 1.8 3.0 3.7 4.4 Services 2.0 -7.7 3.2 3.8 2.7 2.1 Inflation (Consumer Price Index) 1.0 -2.3 -0.6 2.5 2.7 2.5 Current Account Balance (% of GDP) -2.1 -9.3 4.3 4.6 3.4 3.1 Fiscal Balance (% of GDP) -9.1 -17.4 -10.7 -6.8 -5.6 -5.0 GHG emissions growth (mtCO2e) 6.1 -2.0 3.1 3.5 3.3 3.3 Energy related GHG emissions (% of total) 63.3 62.2 62.9 63.7 64.2 64.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 5 Apr 22 Heavy reliance on food and energy im- ports presents a key vulnerability. Global DJIBOUTI Key conditions and commodity price shocks are immediately felt in Djibouti’s relatively small and un- challenges diversified economy, putting upward pressure on inflation and potentially jeop- Table 1 2021 In the decade leading up to the COVID-19 ardizing food and energy security. The Population, million 1.0 pandemic, Djibouti’s economy was grow- conflict between Ukraine and Russia–two GDP, current US$ billion 3.6 ing rapidly by over 6 percent per year on of the world’s largest producers of GDP per capita, current US$ 3576.5 average, driven by externally financed, wheat–may exacerbate some of these a 17.0 International poverty rate ($1.9) large-scale investment in transport and sources of fragility. a 39.8 port infrastructure, which aimed at mak- In 2017 (latest available data), 39 percent of Lower middle-income poverty rate ($3.2) a 21.1 ing the most out of the country’s strategic the population lived below the lower-mid- National poverty rate Gini index a 41.6 location and deep-water port to serve as dle income poverty line ($3.20 a day, 2011 School enrollment, primary (% gross) b 73.8 a key regional refueling, trade and trans- PPP) and 17 percent in extreme poverty b 67.1 shipment center. (below the international poverty line of Life expectancy at birth, years This development strategy has come at the $1.90 a day, 2011 PPP). Djibouti is one of Total GHG Emissions (mtCO2e) 1.4 cost of rising debt vulnerabilities. Dji- the most unequal countries in the MENA Source: WDI, Macro Poverty Outlook, and official data. bouti’s public and publicly guaranteed region, with an estimated Gini coefficient a/ Most recent value (2017), 2011 PPPs. b/ WDI for School enrollment (2020); Life expectancy debt rose sharply from 37.5 percent of GDP of 41.6 in 2017. Poor data landscape, both (2019). in 2010 to an estimated 74 percent in 2021. in terms of quality and availability, hin- Rising debt service cost of fast-maturing ders the ability to plan. debts has crowded out much needed The withdrawal of COVID-19 movement spending in social sectors. Health and so- restrictions facilitated Djibouti’s economic cial expenditures represent 5 percent and rebound in 2021,to an estimated 4.3%. 3 percent of the government’s budget, re- Recent developments spectively compared to more than 30 per- Growth is projected to remain moderate in cent for public infrastructure. GDP growth rebounded to 4.3 percent 2022 but to expand briskly thereafter thanks The pandemic and the conflict in neigh- in 2021 from 0.5 percent in 2020 (lowest to infrastructure projects, reducing the in- boring Ethiopia had a heavy toll on Dji- growth since 2000), driven by the with- bouti’s economy and fiscal accounts (in- drawal of COVID-19 movement restric- cidence of poverty from 14.7% in 2020to a cluding Ports related SOEs revenues), tions, which allowed the resumption of projected 12.4% in 2024.Regional stability further constraining the government’s major public works, such as the transfor- and commitment to fiscal consolidation and debt service capacity. Since February mation of the old port into a shopping structural reforms remain critical for Dji- 2022, Djibouti’s external and public debt center, preparatory works for the con- bouti’s growth prospects. As a net importer are assessed as unsustainable. Over the struction of a shipyard repair factory, and medium term, debt service is set to in- development of Damerjog Industrial De- of food and energy, Djibouti is vulnerable to velopment Free Trade Zone (DDID FTZ). crease, as different payments come to commodity price shocks, which is further maturity, including the deferred debt ser- Government transfers and income sup- exacerbated by the war in Ukraine. vices linked to the DSSI. port initiatives also bolstered household FIGURE 1 Djibouti / Real GDP growth, fiscal, and current FIGURE 2 Djibouti / Actual and projected poverty rates and account balances real GDP per capita Percent of GDP Percent change Poverty rate (%) Real GDP per capita (constant LCU) 24 10 80 700000 19 8 70 600000 6 60 500000 14 50 4 400000 9 40 2 300000 4 30 0 200000 20 -1 -2 10 100000 -6 -4 0 0 2017 2018 2019 2020 e 2021 f 2022 f 2023 f 2012 2014 2016 2018 2020 2022 2024 Real GDP growth (rhs) Current account balance (lhs) International poverty rate Lower middle-income pov. rate Government fiscal deficit (rhs) Upper middle-income pov. rate Real GDP pc Sources: Government of Djibouti and World Bank staff projections. Source: World Bank. Notes: see Table 2. MPO 6 Apr 22 consumption, but a softening of maritime the investment code or established in free transport and services overall (connected zones. On the expenditure side, the Law to the Ethiopian crisis) have somewhat Outlook foresees a 5 percent reduction of subsidies offset the growth momentum. Headline to SOEs, freeze of new recruitments in the inflation rose to 2.5 percent at end-2021 Growth is projected to soften to 3.3 percent public service, and the centralization of cen- (y/y), reflecting the recovery of domestic in 2022 reflecting spillover effects of re- tral government’s tenders and purchases of demand, high global commodity prices, gional instability, and namely if the crisis goods and services. While encouraging, and recurrent shortages in imports of in Ethiopia protracts further. Economic ac- these measures will only partially offset the fresh food from Ethiopia. tivity is expected to strengthen in 2023 and debt service requirements, hence the gov- The overall fiscal deficit stood at 1.8 per- 2024 boosted by new infrastructure pro- ernment is expected to engage with its cred- cent of GDP in 2021, nearly the same as in jects. Djibouti’s medium-term outlook is itors to explore additional way to address 2020. New tax exemptions, lower interna- subject to downside risks, including the debt obligations and strengthen domestic tional aid, and continued pandemic-relat- emergence of new COVID-19 variants, revenue mobilization, including by ratio- ed tax reliefs more than cancelled out the persistent disruption in global transports nalizing tax exemptions and negotiating fiscal space created by the DSSI (US$57.7 and logistics value chains (particularly im- more favorable bilateral deals on rents paid million or 1.6 percent of GDP) and expen- portant for port-related SOEs activities), by military bases. diture rationalization (including subsidies and continuation or possible intensifica- With continued economic growth, poverty and transfers to SOEs). tion the Ethiopian crisis. As a net importer ($1.90 per day) is expected to resume its The current account position deteriorated of food and energy, the economic conse- downward trend from 14 percent in 2022 to sharply from a surplus of 11.6 percent of quences of the the war in Ukraine would 12.4 percent in 2024. As existing household GDP in 2020 to a deficit of 1.1 percent likely affect Djibouti's external account budget surveys do not capture a large pro- in 2021, driven by the slowdown in ex- through higher import bills. portion of the population that are either un- ports to Ethiopia and increased imports The 2022 Finance Law proposes several rev- documented, nomadic, or displaced, the due to stronger domestic demand. On the enue and expenditure measures to create fis- above poverty estimates are lower bound. upside, a US$40 million SDRs allocation cal space for debt services. Tax measures in- Policy choices in the macro-fiscal space and from the IMF helped maintain a strong clude the revision of income tax brackets, re- the structure of the economy in upcoming reserve coverage, at 5 months of imports ductionintheVATthreshold,andone-offtax years will be consequential to the poverty as of end-2021. payments for companies exempted under reduction path in Djibouti. TABLE 2 Djibouti / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 7.8 0.5 4.3 3.3 5.2 6.2 Private Consumption 5.0 -5.0 4.7 4.6 4.6 5.0 Government Consumption -0.5 -2.1 8.3 -0.5 9.4 4.3 Gross Fixed Capital Investment 26.4 -37.2 5.3 1.8 7.6 7.1 Exports, Goods and Services 12.9 7.5 4.3 3.6 4.6 7.0 Imports, Goods and Services 13.9 -0.5 5.5 3.9 5.5 7.0 Real GDP growth, at constant factor prices 7.2 0.5 4.3 3.3 5.2 6.2 Agriculture 0.7 3.5 3.5 3.5 3.5 3.5 Industry 9.4 2.0 4.5 4.2 6.5 9.0 Services 6.8 0.1 4.3 3.1 4.9 5.5 Inflation (Consumer Price Index) 3.3 1.8 1.2 2.0 2.0 2.0 Current Account Balance (% of GDP) 28.9 11.6 -1.1 -3.3 -1.7 0.7 Fiscal Balance (% of GDP) -0.3 -1.7 -1.8 -2.8 -2.4 -1.9 Debt (% of GDP) 65.3 73.3 73.5 74.3 75.1 75.3 Primary Balance (% of GDP) 0.9 -1.2 -0.9 -1.8 -1.4 -0.9 a,b International poverty rate ($1.9 in 2011 PPP) 14.4 14.7 14.2 14.0 13.5 12.4 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 35.0 35.3 34.5 33.8 32.1 30.8 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 65.3 65.8 65.0 64.2 62.8 61.2 GHG emissions growth (mtCO2e) 1.6 0.3 0.8 0.8 0.8 0.8 Energy related GHG emissions (% of total) 31.0 31.1 31.3 31.6 31.8 32.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2017-EDAM.Actual data: 2017. Nowcast: 2018-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2017) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 7 Apr 22 debt remains elevated. Financing require- ments are thus high, at a time when glob- ARAB REPUBLIC Key conditions and al financial conditions are tightening as advanced economies unwind their accom- challenges OF EGYPT modative monetary policies. Going forward, enhancing public expen- Egypt implemented macroeconomic stabi- diture efficiency and revenue mobiliza- lization and energy sector reforms, as well tion will be crucial to avail the fiscal Table 1 2021 as structural measures to address en- space needed to advance human and Population, million 104.3 trenched problems through taking steps to physical capital for the population of GDP, current US$ billion 404.1 strengthen public debt management and above 103 million. Importantly, continu- GDP per capita, current US$ 3876.4 enhance aspects of the business environ- ing to pursue structural reforms to un- Lower middle-income poverty rate ($3.2) a 28.9 ment. These concerted efforts since leash the private sector’s potential in a 29.7 2016—along with the measures undertak- higher value-added and export-oriented National poverty rate a en at the onset of COVID-19 to ease mon- activities are necessary to create jobs, and Gini index 31.5 b etary conditions, provide selected sectoral improve living standards. School enrollment, primary (% gross) 106.4 support and mobilize external financ- b 72.0 Life expectancy at birth, years ing—enabled the country to face the pan- Total GHG Emissions (mtCO2e) 348.9 demic with relative resilience. Source: WDI, Macro Poverty Outlook, and official data. Nevertheless, the global economic conse- Recent developments a/ Most recent value (2017), 2011 PPPs. quences of the war in Ukraine and associ- b/ Most recent WDI value (2019). ated sanctions on Russia, along with on- On March 21, the Central Bank of Egypt going COVID-related disruptions, threat- (CBE) allowed the exchange rate to depre- en to exacerbate long-standing challenges ciate overnight by around 16 percent to Egyptundertookexchangerate,monetary facing Egypt’s external balances, mainly stem the widening net exports deficit, and andfiscalmeasuresinresponsetoadverse through widening the current account raised policy rates by 100 basis points to globaldevelopments(includingsoaring deficit (given the country’s net commod- curb inflation and contain portfolio out- pricesandtighteningfinancialconditions), ity importer status, and the concentrated flows. Meanwhile, the government intro- nature of trade with Russia and Ukraine). duced a mitigation package worth LE130 aggravatedbythewarinUkraine.Yet,these billion (1.6 percent of FY2022/23 GDP) to Egypt’s growth model that shifted over policyactionsalsoreflectunderlyingstruc- the past two decades towards non-trad- alleviate the impact of the rising prices turalchallenges.Thesurgeingrowthto9 able lower productivity sectors con- through hikes to public sector wages and percentinH1-FY2021/22(supportedbyre- tributed to the relatively limited export pensions, tax measures, and expanding penetration and sophistication, as well as coverage of the cash transfer programs, boundsinexport-orientedsectors)isexpect- below-potential labor market outcomes. among other measures. edtoslowdowngraduallythroughFY2022/ Official estimates indicate recent gains in Prior to the external shock that triggered 23.Reformstoenhanceprivateinvestment, welfare; however poverty rates were at these policy measures, the economy was exportsandFDIremaincrucialfortheecono- 29.7 percent, as reported for the period recovering, although pressures on exter- my’sresilienceandcompetitiveness. October 2019—March 2020. Despite sig- nal and fiscal accounts were building. nificant fiscal consolidation, government Growth had surged to 9 percent during FIGURE 1 Arab Republic of Egypt / Real GDP growth and FIGURE 2 Arab Republic of Egypt / Banking sector net labor market indicators foreign assets Percent Percent of working-age population LE Billion 10 50 400 8 45 300 40 6 200 35 4 100 30 2 25 0 0 20 -100 -2 Real GDP Growth 15 CBE NFA Banks NFA Employment Rate (rhs) Labor Force Participation Rate (rhs) -200 -4 10 FY2019Q1 FY2019Q4 FY2020Q3 FY2021Q2 Sources: Ministry of Planning (MoP) and CAPMAS. Source: World Bank estimates based on CBE. MPO 8 Apr 22 H1-FY2021/22 (July—December 2021), domestic banks may have partly borne due to the higher imports bill, and the compared to a modest rate of 1.4 percent the consequences. impact of the Ukraine war on tourism as a year earlier. The resumption of inter- well as on demand for non-oil exports national travel and trade, global pent- (notably by Europe). Notwithstanding up demand and favorable base effects the pressures from the decline in portfo- allowed for strong rebounds in the ex- Outlook lio investments, the capital and financial port-oriented sectors, such as tourism, account can remain relatively buoyed by the Suez Canal, non-oil manufacturing, The recent surge in economic activity has potential financing from the Internation- and gas extractives. The communications set Egypt on track to achieve growth of al Monetary Fund (requested on March and construction sectors also continue to 5.5 percent in FY2021/22. However, base 23). Other possible mitigating factors in- be important contributors to growth. On effects and the demand overshoot are ex- clude the boost that higher international the demand-side, consumption and in- pected to start tapering off and economic prices can provide to Egypt’s gas exports, vestment improved, but the net exports activity will be adversely affected by the remittances from the GCC, and FDI in- deficit widened, partly because the repercussions of the war in Ukraine. flows to oil and gas extractives. Egypt al- steady and marked real exchange rate Thus, growth is expected to slow down to so issued a maiden Samurai bond worth appreciation over the previous years fa- 5 percent in FY2022/23. Inflation is fore- US$500 million in end-March 2022, and vored imports growth, and the accelerat- cast to surpass the CBE’s inflation tar- other sovereign issuances are expected ing global commodity prices also inflated get range (7 percent +/2 PPT) through the to continue, including innovative Green Egypt’s import bill. remainder of FY2021/22 due to the im- bonds and Sukuk. Domestic prices were gradually rising, and pact of the depreciation, imported infla- The budget deficit is forecast to increase inflation spiked to 8.8 percent in February tion, possible supply bottlenecks, along in FY2021/22 on account of the additional 2022 (more than 2.7 percentage points with the potential continuation of upward mitigation measures introduced in March higher than its average since the beginning adjustments to retail fuel prices. While 2022, and soaring international prices and of FY2021/22), reflecting early repercus- some mitigation is expected from the re- monetary tightening that are driving up sions of the war in Ukraine. cent fiscal package, existing food subsidy the cost of government purchases, subsi- While international reserves are comfort- and cash transfer programs, as well as the dies, wages and interest payments. Gov- able (at US$41 billion at end-February), relatively large reserves of wheat and oth- ernment debt will, in turn, also increase banks’ net foreign assets position has er cereals, poverty may still increase as due to both the higher deficit and the been in deficit since the beginning of inflation undermines real incomes. adverse valuation impact stemming from FY2021/22; indicating that external ac- The current account deficit-to-GDP ratio is the currency depreciation. Fiscal consol- counts have been under pressure prior to expected to widen to 6 percent in FY2021/ idation is, however, expected to resume the escalation of the war in Ukraine, and 22, from 4.6 percent in FY2020/21, mainly over the medium term. TABLE 2 Arab Republic of Egypt / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 5.6 3.6 3.3 5.5 5.0 5.3 Private Consumption 1.0 7.3 7.1 5.7 4.0 4.1 Government Consumption 2.8 6.7 3.7 6.0 7.5 4.0 Gross Fixed Capital Investment 14.1 -20.9 -8.5 8.2 4.9 8.3 Exports, Goods and Services -2.2 -21.7 -13.4 15.0 24.0 11.0 Imports, Goods and Services -8.9 -17.9 0.2 13.5 13.0 5.5 Real GDP growth, at constant factor prices 5.1 2.5 2.0 5.4 4.9 5.3 Agriculture 3.3 3.3 3.8 4.5 4.5 3.3 Industry 5.8 0.6 -1.1 6.6 6.0 6.4 Services 5.1 3.6 3.5 4.8 4.3 5.0 Inflation (Consumer Price Index) 13.9 5.7 4.5 10.0 9.0 8.5 Current Account Balance (% of GDP) -3.6 -3.1 -4.6 -6.0 -5.0 -4.0 Net Foreign Direct Investment (% of GDP) 2.6 1.9 1.2 1.5 1.8 2.0 Fiscal Balance (% of GDP) -8.1 -7.9 -7.4 -7.9 -7.3 -7.1 Debt (% of GDP) 90.2 87.0 92.4 96.4 91.6 87.3 Primary Balance (% of GDP) 1.9 1.8 1.5 1.3 1.7 2.0 a,b International poverty rate ($1.9 in 2011 PPP) 3.7 4.3 4.3 4.3 4.2 4.2 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 28.4 29.8 29.7 29.5 29.2 28.9 GHG emissions growth (mtCO2e) 1.9 2.1 1.7 1.8 1.9 1.9 Energy related GHG emissions (% of total) 68.3 68.6 69.2 69.2 69.1 68.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2010-HIECS, 2015-HIECS, and 2017-HIECS. Actual data: 2017. Nowcast: 2018-2021. Forecasts are from 2022 to 2024. b/ Projection using annualized elasticity (2010-2015) with pass-through = 0.07 based on GDP per capita in constant LCU. MPO 9 Apr 22 subpar performance. Iran is one of the largest subsidizers of fossil fuels globally, IRAN, ISLAMIC Key conditions and leading to allocative inefficiencies and sig- nificant budget and equity implications, as challenges REPUBLIC well as high carbon intensity of the econo- my. While social protection measures part- Iran’s economy is slowly emerging from ly mitigated pressures, the lack of target- a decade-long stagnation bogged by two ing and inflation indexation reduced their Table 1 2021 rounds of economic sanctions, marked oil impact over time. Furthermore, climate Population, million 85.0 price cyclicality, and the COVID-19 pan- change challenges in Iran have hurt GDP, current US$ billion 249.7 demic. Real GDP in 2020/211 was almost growth, especially in labor-intensive agri- GDP per capita, current US$ 2936.3 at the same level as 2010/11, and real GDP culture and industry sectors following School enrollment, primary (% gross) a 110.7 per capita in 2020/21 fell to the 2004/05 lev- record high temperatures and low rain- a 76.7 el. The large contractions in oil exports falls. These factors constrain the pace of re- Life expectancy at birth, years placed severe pressures on government fi- covery and the dynamism of the economy Total GHG Emissions (mtCO2e) 819.9 nances at the same time, as oil prices start- in the outlook. Source: WDI, Macro Poverty Outlook, and official data. ed a downward trajectory in late-2018, a/ Most recent WDI value (2019). which further worsened during the COVID-19 pandemic. While current ac- count pressures were partly absorbed Recent developments through the depreciation of the rial and Iran’s economy continues its gradual re- import substitution, the depreciation to- The economy continued to rebound in covery that started in mid-2020, driven gether with the government’s budget 9M-21/22 (Apr-Dec 2021), following a by the oil sector and services. However, deficit financing operations fueled infla- two-year recession. A recovery in the oil tionary pressures. High inflation and lack and service sectors (11.7 and 6.5 percent water and energy shortages led to con- of jobs negatively impacted household growth, respectively) – following a re- traction of the agriculture and industry welfare and added to social grievances. turn of global and domestic activity af- sectors. Only a third of the pandemic pe- The impact of the pandemic on Iran’s labor ter the start of the pandemic – led to a riod jobs losses have so far been recovered. market was significant following multiple 5 percent YoY growth in 9M-21/22. How- and long-lasting waves of infections. ever, the agriculture sector contracted by Oil revenue shortfalls led to a growing Iran’s economic challenges are also struc- 2.1 percent due to drought and energy budget deficit, adding to inflationary tural. Despite adjustments that partially blackouts. On the demand side, a 3.4 pressures through the government’s mitigated the impact of external shocks, percent expansion in consumption drove deficit financing operations. Growth is the economy remains constrained by wide- GDP growth as activity returned closer forecast to remain modest with both up- spread inefficiencies and price distortions to pre-pandemic levels. Imports growth that have contributed to the economy’s (25.5 percent) outweighed the pick-up in side and downside risks associated with exports (5.4 percent), and investment also oil market dynamics, geopolitical ten- declined (5.2 percent). The economic re- sions, the pandemic, and climate change. 1/ The Iranian calendar year starts on March 21 of bound has yet to be reflected in the la- every year and ends on March 20 of the following year. bor market as the recovery was largely FIGURE 1 Islamic Republic of Iran / GDP growth and FIGURE 2 Islamic Republic of Iran / Current account supply side decomposition balance Percent, percentage points US$ billion Percent (YoY) 15 12 120 9 90 10 6 60 5 3 30 0 0 0 -3 -30 -5 -6 -60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -10 2015/16 2017/18 2019/20 2021/22e 2023/24f 2017/18 2018/19 2019/20 2020/21 21/22 Oil Agriculture Industry CAB, US$ billion (lhs) Exports growth, YoY (rhs) Services Net taxes GDP growth Imports growth, YoY (rhs) Sources: CBI and World Bank staff calculations. Sources: CBI and World Bank staff calculations. MPO 10 Apr 22 driven by the oil sector, and employment against the US dollar and M2 expanded by in real investment. Inflation is forecast to growth in services and industries could 39.8 percent. ease relative to 2021/22 but remain high, not compensate for job losses in the agri- A strong expansion in hydrocarbon ex- at over 30 percent annually, as fiscal and culture sector. ports drove the current account balance exchange rate pressures persist. Sustained The government faced challenges in financ- to a surplus of US$5.9 billion in H1-21/ inflation will continue to put pressure ing a growing fiscal deficit due to a shortfall 22. Oil exports grew through both price on the livelihood of poor and vulnerable in oil revenues and higher expenditures. In and (likely) volume channels, reaching households, already severely hit by the line with exports, oil revenues grew rapidly US$18.6 billion (118 percent growth, YoY), pandemic crisis. in H1-21/22 (over 300 percent YoY), howev- partly a base effect from their 2020/21 col- Higher projected oil prices in the outlook er from a record low base. The oil proceeds lapse after the pandemic. While oil export period and growth in oil export volumes only met 14 percent of the ambitious budget volumes are not officially reported (be- considering the tighter global oil market target for the year and accounted for 12 per- cause of the sanctions), the higher oil pro- are forecast to curb fiscal pressures. cent of government revenues (an improve- duction growth in 2021 (21 percent) indi- However, high expenditure growth due ment from the 4 percent share of H1-20/21 cates an upward trend in exports includ- to increasing wage bill and pension but far from pre-sanction share of 50 percent ing through indirect exports to China. spending are projected to keep the fiscal in H1-18/19). However, tax revenues grew Non-oil exports and imports surpassed balance in a deficit of 3.8 percent of GDP by 60 percent, partly reflecting higher infla- their pre-pandemic levels during April in 2022-24. tion, and expenditures also grew by 58 per- 2021 - February 2022 by 12.7 percent and Iran’s economic outlook is subject to signif- cent. This brought the budget deficit to 6.8 16.6 percent, respectively. icant risks. On the upside, further increase percent of GDP in H1-21/22, which was in oil prices following heightened global mainly financed through bond issuance (82 tensions can directly boost fiscal revenues percent), as the government could not real- and indirectly lead to a faster growth in ize its planned sales of public assets. Outlook oil export volumes if oil markets seek all Inflation continued its upward trend, dri- available supply to ease price pressures. ven by inflationary expectations, currency Average GDP growth is projected to re- With both Iran and Russia under sanc- depreciation, and monetary expansion. main modest in the medium term as the tions, higher trade and investment with Headline and core inflation in 2021/22 rose economy remains constrained by the con- Russia could reduce the impact of sanc- to an estimated 40.7 and 51 percent, re- tinued impact of the pandemic through tions on Iran. Downside risks relate to the spectively – recording the third consecu- weaker domestic and global demand, resurgence of new COVID-19 variants, a tive year of inflation above 35 percent – while trade, especially oil exports, remains worsening climate change impact, and but have since eased to 35.4 and 39.1 per- restricted by ongoing sanctions. Non-oil heightened geopolitical tensions including cent YoY in February 2022. In 10M-21/22, GDP growth is projected to remain below the recent conflict’s impact on global food the currency depreciated by 14.7 percent potential following previous years’ decline prices and Iran’s imports. TABLE 2 Islamic Republic of Iran / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019/20 2020/21 2021/22 2022/23e 2023/24f 2024/25f Real GDP growth, at constant market prices -6.8 3.4 4.1 3.7 2.7 2.3 Private Consumption -7.7 -0.4 3.4 2.9 2.3 1.9 Government Consumption -6.0 -2.3 3.9 3.9 3.4 2.9 Gross Fixed Capital Investment -5.9 2.5 -4.4 5.3 3.4 3.4 Exports, Goods and Services -29.9 -5.4 8.9 8.7 5.6 4.5 Imports, Goods and Services -38.1 -29.2 22.8 5.1 3.9 3.1 Real GDP growth, at constant factor prices -6.5 3.6 4.1 3.7 2.7 2.3 Agriculture 8.8 4.5 -1.3 1.7 1.5 1.5 Industry -15.9 8.4 4.6 5.4 3.5 3.2 Services -0.5 -0.1 4.6 2.6 2.1 1.7 Inflation (Consumer Price Index) 41.3 36.4 40.7 37.6 34.8 32.1 Current Account Balance (% of GDP) 1.5 -0.3 1.8 4.7 3.1 2.8 Fiscal Balance (% of GDP) -5.0 -6.3 -5.5 -3.7 -3.8 -3.9 Gross Public Debt (% of GDP) 48.0 52.0 49.8 46.4 44.5 43.2 Primary Balance (% of GDP) -4.5 -5.3 -4.5 -2.8 -3.0 -3.1 GHG emissions growth (mtCO2e) -0.6 -3.2 2.8 2.8 2.2 2.0 Energy related GHG emissions (% of total) 71.3 70.5 71.0 71.3 71.4 71.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 11 Apr 22 high temperatures and severe droughts have impacted agricultural production, REPUBLIC OF Key conditions and making Iraq more reliant on imports as commodity prices rise, with implications challenges IRAQ for food security and poverty, especially in rural areas. High dependence on gas and Iraq’s economy is gradually emerging from electricity imports have increased the mag- the pandemic, driven by a recovery in non- nitude of impact from disruptions to these Table 1 2021 oil economic activity and more favorable oil imports. This while Iraq is the world’s sec- Population, million 41.2 market dynamics. Non-oil economic activ- ond largest gas flaring country failing to GDP, current US$ billion 204.8 ity is recovering to the pre-pandemic level capture over half of the associated gas in GDP per capita, current US$ 4973.4 as COVID-19 restrictions are eased. Oil pro- oil production. School enrollment, primary (% gross) a 108.7 duction has also gradually increased as per A protracted government formation a 70.6 the OPEC+ production quota tapering, process and a resurgence of security chal- Life expectancy at birth, years which is scheduled to be fully phased out by lenges cloud the prospects of Iraq’s econo- Total GHG Emissions (mtCO2e) 246.2 September 2022. Higher oil prices have also my. A political dead lock has stalled the Source: WDI, Macro Poverty Outlook, and official data. bolstered government revenues and government formation process since the a/ Most recent WDI value (2019). strengthened reserves. October 2021 parliamentary elections and However, Iraq’s economic recovery re- led to postponing of the 2022 budget, mains fraught by significant volatility and adding to pre-exiting social grievances re- Iraq’s economy is gradually recovering long-standing structural challenges. Due to garding corruption, poor public service de- from the twin shocks of the pandemic and overdependence on oil, exports and govern- livery and lack of economic opportunities. collapse in oil prices in 2020. Both oil and ment revenues remain highly volatile and The oil windfall presents a crucial opportu- non-oil growth are on track to reach their pro-cyclical in line with oil price dynamics. nity for implementation of a comprehensive Government spending is beset by rigid package of economic reforms to achieve pre-pandemic levels as oil production in- wage and transfer expenditures. The pan- sustainable economic growth and cushion creases and the easing of COVID-19 re- demic also amplified Iraq’s pre-existing the impact of future economic shocks. strictions restores domestic economic ac- fragilities in the health care system, public tivity. Fiscal and external deficits are back administration, and digital and physical in- frastructure, compounding low productiv- to surpluses as oil prices continue to surge. ity growth. The disproportional impacts of Recent developments Growth in the medium term is projected to the crisis on the pre-pandemic poor and vul- be driven by the oil sector as OPEC+ pro- nerable population exacerbated the pre-ex- Iraq’s economy is gradually rebounding duction cuts are phased out. The outlook re- isting poverty trends and inequality. While following the deep economic strains of the mains subject to significant risks including the overall unemployment rate increased COVID-19 pandemic. Real GDP is estimat- during the pandemic, unemployment ed to have edged up by 1.3 percent in 2021, uncertainties relating to the impact of among the displaced, returnees and women after a sharp contraction of 11.3 percent in geopolitical tensions, the ongoing pandem- jobseekers, and those pre-pandemic self- 2020. The rebound was mainly driven by the ic, security challenges, and climate change. employed and informal workers, in partic- non-oil sector which grew by 6 percent in ular, is pronounced significantly. Record 9M-2021 year-on-year (y/y), underpinned FIGURE 1 Republic of Iraq / GDP growth and supply side FIGURE 2 Republic of Iraq / Fiscal account outlook decomposition Percent, percentage points Percent of GDP US$ per barrel 15 60 100 50 90 10 40 80 30 70 5 20 60 10 50 0 0 40 -10 -5 -20 30 -30 20 -10 -40 10 -50 0 -15 2019 2020 2021 2022 2023 2024 2015 2017 2019 2021 2023 Oil revenues (lhs) Non-Oil revenues (lhs) Oil Agriculture Non-oil industry Wages and pension (lhs) Other expenditures (lhs) Services GDP growth Fiscal balance (lhs) Oil price (rhs) Sources: Iraq’s COSIT and World Bank staff calculations. Sources: Iraq MoF, MoO, and World Bank staff calculations. MPO 12 Apr 22 by a strong performance of the high con- by 25 percent (y/y). The latter was driven such, Iraq’s overall fiscal surplus is project- tact sectors including transport, accommo- by private imports’ downward adjustment ed to moderate from an initial high of 11.7 dation, and retail sectors. However, agri- following the devaluation. The stronger percent of GDP in 2022 to 4.9 percent of cultural and construction contracted by trade balance pushed official reserves up GDP in 2024, while the debt-to-GDP ratio 17.5 percent and 36.8 percent respectively, from US$54 billion in Dec-2020 to US$61.9 gradually improves to an annual average following severe droughts, energy out- billion in Dec-2021, strengthening buffers of 43 percent in 2022-24. ages, and the rising global price of inputs. to external shocks. Iraq’s economic outlook remains subject In 9M-2021, oil GDP contracted by 4 per- to significant risks. The recent geopolitical cent (y/y) as Iraq adjusted its oil produc- tensions related to the Russian war and tion as per the OPEC+ agreement. Head- invasion highlight risks for Iraq economy line and core inflation edged up to an av- Outlook both on the up and downside. While any erage of 6 and 6.6 percent (y/y) in 2021, re- further oil price hikes would further im- spectively, following the 23 percent deval- The turnaround in oil markets has signif- prove Iraq’s fiscal balance, rising food uation in Dec-2020 and the gradual recov- icantly improved Iraq’s economic outlook prices and disruption to agriculture im- ery in domestic demand. in the medium term. Overall growth in ports will exacerbate pre-existing poverty Government revenues surged by 73 per- 2022 is now forecast at 8.9 percent as trends and increase food security risks. cent (y/y) in 2021 spurred by higher oil OPEC+ quotas end and Iraq’s production The conflict also poses risks to Iraq’s prices which averaged at US$68.3/barrel in surpasses its pre-pandemic level of 4.6 crude oil production if operations of 2021 (78 percent increase y/y). These bud- mbpd. Growth in the outer years is project- Russian oil companies in Iraq are im- getary gains were in part boosted by the ed to remain modest at 3.7 percent on av- pacted by international sanctions on Rus- currency devaluation and measures to mo- erage as oil production moderates. Non-oil sia. Higher oil prices could hurt the long- bilize non-oil domestic revenues mainly GDP growth is projected to converge to its standing need to reform thereby deepen- from customs. While recurrent expendi- long-term potential growth trend in part ing Iraq’s structural economic challenges. tures – including the wage bill – remained aided by higher investments that would Further intensified climate change effects high at 29 percent of GDP, improved oil re- be financed through the oil windfall. How- and water shortages will decrease agricul- ceipts turned the overall fiscal balance to a ever, growth is forecast to remain con- tural production. Additionally, COVID-19 surplus of 5.3 percent of GDP in 2021. The strained by the economy’s limited absorp- vaccination in Iraq remains very low, improved fiscal situation together with a tive capacity and other inefficiencies. among the lowest in the region and well denominator effect from the high nominal Higher projected oil prices in 2022-2024 are below the global rate, and poses additional GDP growth (33 percent y/y) is estimated forecast to significantly improve Iraq’s fis- risks. It remains low even among the most to have reduced the debt-to-GDP ratio to cal and external outlook. Due to their high vulnerable group, the elderly, and among 54.8 percent in 2021, down from 64.7 per- dependence on oil, government revenues those with high risk of exposure to the cent in 2020. are likely to grow significantly through virus – poorer households and informal Higher oil prices and exports also improved both price and volume channels. In the ab- workers that are less likely to work from Iraq’s external accounts. The current ac- sence of a fiscal rule, part of the new fiscal home and more likely to live in large count balance turned into a surplus of 8.3 space is likely to be absorbed by higher households in cramped conditions. Other percent of GDP in 9M-2021 as exports investment expenditures along with other risks include the decline in oil prices, and a surged by 46 percent and imports declined procyclical discretionary spending. As deterioration of the security situation. TABLE 2 Republic of Iraq / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 4.8 -8.6 1.3 8.9 4.5 3.0 Private Consumption 1.5 3.1 2.3 3.2 3.1 3.0 Government Consumption 25.2 -9.5 5.6 6.0 4.0 3.4 Gross Fixed Capital Investment 496.1 -67.0 10.0 13.3 9.5 8.3 Exports, Goods and Services 4.6 -10.1 -0.5 13.5 5.5 2.9 Imports, Goods and Services 28.4 -23.9 4.2 8.7 5.7 5.0 Real GDP growth, at constant factor prices 5.5 -11.3 1.3 8.9 4.5 3.0 Agriculture 46.2 22.5 -12.0 4.0 2.0 2.0 Industry 7.4 -15.2 -0.1 12.5 5.3 2.9 Services -1.8 -6.3 6.5 2.3 3.0 3.1 Inflation (Consumer Price Index) -0.2 0.6 6.0 3.3 3.0 2.5 a Current Account Balance (% of GDP) 5.6 -5.2 8.2 10.6 7.4 5.2 a Net Foreign Direct Investment (% of GDP) 1.4 1.6 1.5 1.6 1.6 1.7 a Fiscal Balance (% of GDP) 1.3 -5.8 4.3 11.7 6.7 4.9 a Debt (% of GDP) 44.7 64.7 54.8 43.3 42.8 41.7 a Primary Balance (% of GDP) 2.4 -4.8 5.3 12.5 7.6 6.0 GHG emissions growth (mtCO2e) 11.4 -2.6 7.3 18.1 13.8 11.6 Energy related GHG emissions (% of total) 72.5 73.8 76.4 79.3 81.2 82.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Share of factor cost GDP. MPO 13 Apr 22 trade links with Ukraine and Russia are limited, a continuous and accelerated JORDAN Key conditions and surge in commodity prices and stronger slowdown in global growth represent challenges imminent downside risks to the econo- my. In absence of accelerated progress Table 1 2021 During the past decade, Jordan has faced on structural reforms, output could take Population, million 10.3 multiple external shocks. Growth perfor- longer to recover due to deeper scars GDP, current US$ billion 45.2 mance has been affected by regional in- on firms’ balance sheets and potentially GDP per capita, current US$ 4403.8 stability, which disrupted trade routes higher bankruptcies, human capital loss- a 15.7 National poverty rate and key export markets, triggered a es, and weaker human capital accumula- b 80.4 large refugee influx, and reduced for- tion. Over medium-to-long run, the im- School enrollment, primary (% gross) b 74.5 eign capital inflows through an econom- pact of climate change on natural haz- Life expectancy at birth, years Total GHG Emissions (mtCO2e) 35.0 ic slowdown in GCC countries. Jordan’s ards could intensify the country’s water growth slowed to an average of 2.4 per- scarcity, posing a serious challenge to the Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2017/8). cent a year during 2010-2019, compared agriculture sector. b/ WDI for School enrollment (2020); Life expectancy to 6.5 percent during 2000-2009, while (2019). population grew twice as fast as real GDP due to the influx of refugees. As a result, job growth could not match Recent developments Jordan’s economic rebound during 2021 growth in the working age population. has been steady, but significant slack re- Unemployment was high and rising in Jordan’s economic recovery during the mains in the economy. Unemployment is comparison to regional peers even prior first 9 months of 2021 was steady to COVID-19 shock. but was slightly below expectation. still persistently high - particularly for Jordan has weathered the COVID-19 Growth reached 2.1 percent in the youth while labor force participation shock better than most countries. Its 9M-2021 year-on-year, led by a broad- is among the lowest regionally. The cur- economy registered a modest contrac- based recovery of the services and in- rent account deficit remains elevated, but tion during 2020, cushioned by the dustrial sectors. Nonetheless, perfor- the fiscal position is showing tangible im- substantial improvement in terms of mance of some sub-sectors, specifically trade and the authorities’ timely mon- contact-intensive services, remain be- provement. Headline inflation remains etary and fiscal responses, including low pre-pandemic levels. low despite increases in transport and fu- wage subsidies for formal workers and The fiscal position showed a notable im- el prices. Going forward, economic provision of temporary cash transfers provement vis-à-vis 2020. Central Gov- growth is projected to remain modest as for poor and informal vulnerable ernment (CG) fiscal deficit (incl. grants) households. as of 11M-2021 stood at 4.6 percent of both the direct and indirect impacts of the Over the medium term, Jordan’s structural GDP, 1.5 percentage point lower than in Russian invasion, war and associated impediments along with imminent global 2020. A strong recovery in domestic rev- sanctions unfold, creating headwinds for risk factors arising from the Russian in- enue collection contributed to the signifi- Jordan’s nascent economic recovery. vasion, war and associated sanctions pose cant improvement, which more than off- serious downside risks. Although direct set elevated spending. FIGURE 1 Jordan / Current account deficit and its drivers FIGURE 2 Jordan / Unemployment rate in regional comparison Percent of GDP Percent 20 30 15 10 25 5 20 0 -5 -2.1 15 -10 -6.9 -8.1 -7.8 -15 -10.6 10 -12.1 -20 -25 5 -30 2017 2018 2019 2020 9M-2020 9M-2021 0 Current Transfers Income account Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Services Balance Trade Balance Turkey Tunisia Morocco Current Account Jordan Egypt Saudi Arabia Sources: Central Bank of Jordan and World Bank staff calculations. Sources: Haver Analytics and World Bank staff calculations. MPO 14 Apr 22 Jordan’s current account deficit (CAD) re- 90.4 percent) before gradually declining mains elevated. The CAD at end-Septem- over the medium-term. ber 2021 widened to 12.1 percent of GDP, Outlook On the external front, the ongoing Russian driven by a substantial increase in the mer- invasion, war and associated sanctions are chandise trade deficit amid unprecedented Growth is projected to reach 2.0 percent estimated to lead to a high CAD in 2022 as a increases in global commodity prices and and 2.1 percent in 2021 and 2022 respec- result of higher energy prices as well as neg- modest recovery in travel receipts com- tively, led by a recovery in domestic de- ative impact on tourism. Tourists receipts pared to pre-COVID-19 levels. Nonethe- mand and supportive government poli- from Russia and Ukraine together account- less, international reserves at end-Decem- cies. On the supply side, acceleration in the ed for 4.8 percent of total tourist receipts in ber 2021 stood at a comfortable level cover- recovery of tourism and services are ex- 2021. As a result, the CAD (including ing 9.5 months of imports, reflecting timely pected to boost the economy. Growth dy- grants) is projected to only modestly nar- donor and IMF program support (as well namics over the medium-term, however, row - reaching 9.1 percent of GDP in 2022, as SDR augmentation). hinge on global economic conditions, compared to an estimated 10.6 percent of Employment indicators still raise concern headwinds from the Russian invasion, war GDP in 2021. Over medium-term, full for households’ welfare. Deterioration in and associated sanctions and timely reso- tourism recovery, pick-up in remittances, the labor market remains the most sig- lution of structural impediments. Reflect- growth in exports and slow-down in im- nificant threat to household welfare. The ing elevated international commodity ports is projected to narrow Jordan’s CAD. employment rate remained low at 26.4 prices, headline inflation during 2022 is Household welfare is expected to slightly percent (Q3-2021). Although unemploy- projected to reach 3.3 percent. improve with the expected slow recovery ment fell slightly since peaking at 25.0 The CG fiscal deficit (incl. grants) is pro- in tourism, domestic demand and interac- percent in Q1-2021, it was still high at jected to improve to 4.0 percent of GDP in tion-intensive services sectors. However, 23.2 percent in Q3-2021, even more so 2022, supported by robust revenue efforts short of a revival of growth beyond the for women (30.8 percent) and young peo- and retraction of COVID-19 related expen- low 2 percent—which in turn is contingent ple (48.5 percent among those aged 15 ditures. Over the medium term, the fiscal on reform implementation—welfare im- to 24 years old). The national poverty deficit is projected to improve supported provements are not expected to be signifi- rate before the pandemic was 15.7 percent by IMF-EFF fiscal measures. Subsequent- cant and could be reversed through shocks (2018). Declines in employment incomes ly, government and guaranteed gross debt given limited household buffers. Larger at the height of the crisis were estimated at end-2022 is projected to reach 114.2 per- households, young, female and informal to increase poverty by as much as 11 per- cent of GDP (with debt net of Social Secu- workers may take longer to recover from centage points. rity Investment Fund holdings at around the economic impacts of the crisis. TABLE 2 Jordan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 2.0 -1.6 2.0 2.1 2.3 2.3 Private Consumption -0.5 -0.8 4.5 2.5 1.6 1.6 Government Consumption 2.1 5.2 3.9 -2.1 0.9 2.4 Gross Fixed Capital Investment -11.1 20.0 4.2 4.6 1.4 2.8 Exports, Goods and Services 6.5 -35.8 20.7 5.7 5.8 6.9 Imports, Goods and Services -3.1 -17.2 19.5 4.2 2.3 4.2 Real GDP growth, at constant factor prices 2.2 -1.4 2.0 2.0 2.3 2.3 Agriculture 2.6 1.6 3.0 2.4 2.6 2.9 Industry 1.4 -2.4 2.7 1.4 1.6 1.8 Services 2.4 -1.2 1.7 2.3 2.6 2.5 Inflation (Consumer Price Index) 0.8 0.3 1.3 3.3 2.5 2.5 Current Account Balance (% of GDP) -2.1 -8.1 -10.6 -9.1 -6.5 -5.0 Net Foreign Direct Investment (% of GDP) 1.5 1.6 1.6 2.2 2.9 3.4 a Fiscal Balance (% of GDP) -4.9 -7.3 -6.0 -4.0 -3.5 -2.4 b Debt (% of GDP) 97.4 109.0 113.6 114.2 114.5 113.0 b Debt, net of SSIF (% of GDP) 78.0 88.0 91.3 90.4 89.2 86.3 a Primary Balance (% of GDP) -1.3 -3.1 -1.7 0.0 0.5 1.6 GHG emissions growth (mtCO2e) 0.2 -4.0 1.7 1.9 1.6 2.1 Energy related GHG emissions (% of total) 63.3 62.0 62.4 62.5 62.8 62.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. a/ CG fiscal balance incl. grants, use of cash and unident. measures as per IMF-EFF (Jan 2022) of 1.3% of GDP in 2023, and 1.6% of GDP in 2024. b/ Government and guaranteed gross debt. Includes securitization of domestic arrears in 2019-21. MPO 15 Apr 22 long-term challenges such as enhanc- ing fiscal sustainability by containing KUWAIT Key conditions and the wage bill, phasing out subsidies and moving ahead with VAT in har- challenges mony with other GCC countries. Table 1 2021 Kuwait’s long-term challenges relate to Population, million 4.3 the economy’s dependence on oil and GDP, current US$ billion 134.7 domestic consumption, and slow imple- Recent developments GDP per capita, current US$ 31325.6 mentation of diversification plans. Large a 87.3 School enrollment, primary (% gross) financial assets underpin Kuwait’s eco- Kuwait’s real GDP growth in 2021 is es- a 75.5 nomic resilience, but these assets alone timated at 2.3 percent, a modest rebound Life expectancy at birth, years Total GHG Emissions (mtCO2e) 113.8 cannot substitute for the fiscal and given the based effect that the COVID-19 Source: WDI, Macro Poverty Outlook, and official data. structural reforms that would offset the driven deep contraction of 8.9 percent in a/ WDI for School enrollment (2020); Life expectancy risks of low oil demand in the future. 2020 generated. The recovery was aided (2019). Fitch Ratings downgraded its sovereign by a pick-up in the oil sector in line with rating in January due to ongoing polit- OPEC+’s decision to ease crude production ical constraints hindering economic re- cuts, as well as a rebound of domestic con- form and debt financing needs. In 2021, sumption supported by renewed debt pay- more than 257,000 expatriates perma- ment deferrals and higher consumer loans. nently relocated following a trend ex- Domestic credit increased by 6.3 percent Kuwait exited a two-year recession in acerbated by the pandemic. Moreover, in 2021, its highest growth rate since 2015, 2021 as COVID-19 restrictions and the government has been accelerating its and was driven by households, while busi- OPEC+ cuts are gradually eased. The fis- Kuwaitisation policy—the replacement ness credit remained flat. The spike in cal deficit is expected to narrow with of foreign workers with Kuwaitis. The COVID-19 cases in early 2022 was the surging oil prices. The economic recovery exodus of expats has resulted in labor highest recorded since the crisis began, shortages, which risks hampering prompting authorities to tighten restric- is projected to gather pace in 2022 due to growth in both the oil and non-oil sec- tions. The case count has since dropped the combined effects of fewer pandemic re- tors. Structural reforms targeting sus- dramatically and now over 83 percent of lated restrictions, higher oil production tained, inclusive, and greener growth the population is fully vaccinated. Inflation and rising oil prices which will boost both are urgently needed. is expected to increase from 2.1 in 2020 to Key risks to the outlook relate to 3.4 percent in 2021 due to higher prices oil and non-oil sectors. However, emerg- the uncertainty over new variants of across all categories, led by food prices. ing coronavirus variants, volatile oil COVID-19, oil market volatility, and The Central Bank of Kuwait raised interest prices and continued political deadlock the political deadlock over structural rates by 25 bp in line with Federal Reserve over key reforms are downside risks. reforms. On the other hand an upside System’s move to tackle inflation. risk is that the recent oil price surge The fiscal deficit narrowed from 33.2 per- triggered by the war in Ukraine con- cent of GDP in FY20/21 to an estimated tinues. As the COVID-19 crisis abates, 11.4 percent of GDP in FY21/22 which is policies should address medium- and narrower than the government’s budget FIGURE 1 Kuwait / General government operations FIGURE 2 Kuwait / Growth: Real GDP, real oil, and real non-oil sectors Percent of GDP Percent of GDP Percent change Percent change 70 20 15 8 60 6 10 10 4 50 0 5 2 40 0 0 -10 30 -5 -2 -20 20 -4 -10 10 -30 -6 -15 Oil GDP 0 -40 Non-Oil GDP -8 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -20 Real GDP growth (rhs) -10 Revenues Expenditure Fiscal Balance (rhs) 2014 2016 2018 2020 2022f 2024f Sources: World Bank, Macroeconomics, Trade and Investment Global Practice, Sources: Kuwait CSB, World Bank, Macroeconomics, Trade and Investment Glob- IMF WEO. Notes: (1) Based on fiscal year cycle (April to March 31), (2) Balances al Practice. exclude investment income and transfers to the Future Generations Fund. MPO 16 Apr 22 (29.8 percent of GDP) due to higher-than- driven by a reduction of migrants (by 8.5 through stronger oil revenues and lower expected oil prices. This more than com- percent between 2019 and 2020). ILO es- spending, primarily subsidy and capital pensated for higher spending (the fiscal timates women and men unemployment spending cuts. However, with the sharp year begins in April and figures exclude rates increased in 2020: 8.2 and 2.0 percent, increase in oil prices following the war in investment income). However, financing respectively, compared to 5.7 and 1.0 per- Ukraine, a large swing into surplus for the the deficit will remain a challenge without cent in 2019. overall fiscal balance (to 13 percent of GDP the approval of the proposed debt law that in 2022) is projected. This will enable the seeks to raise the borrowing limit. In tan- partial clearance of US$7.7 billion in ar- dem with the recovery of global oil prices rears that Kuwait's finance ministry owes and export volumes as pandemic related Outlook to ministries and other public bodies. In international supply chain disruptions light of this, fiscal reform to enhance liq- eased, the current account surplus expand- Economic growth in 2022 is expected to uidity are critical and introducing the VAT ed by an estimated 5.1 percent of GDP in accelerate to 5.7 percent due to higher oil in line with its GCC peers will help diver- 2021. The recovery in trade was led by output, as OPEC+ cuts are phased out, and sify revenue. Furthermore, Kuwait should higher earnings from both oil and non-oil as domestic demand strengthens. Oil pro- seize the opportunity of the favorable fis- exports, mitigated by higher imports. duction is expected to increase by 8.6 per- cal position to delink the economy from oil Kuwait’s labor market is highly segment- cent in 2022 as OPEC+ lifts quotas and new and push forward structural reforms. The ed. According to the 2016-17 Labor Force capacity at the Al Zour refinery comes on- related boost in oil export earnings in ad- Survey, nine out of ten employed Kuwaitis line. Over the medium term, real GDP will dition to improvements in global demand work in the public sector, and thus were expand (averaging 3 percent for 2023-24) and waning concerns over the pandemic, protected from pandemic-related restric- thanks to stronger oil exports and credit will continue to expand the current ac- tions on economic activity. By contrast, mi- growth. Stronger domestic demand will count balance. Kuwait has long-term LNG grant workers are largely employed in the give further momentum to inflation in import contracts with Qatar so the gas private sector (64.3 percent) or as domestic 2022. However, a gradual tightening of price hike is not expected to have a major workers (31 percent). The ILO estimates monetary policy from 2022 onwards will impact. Frequent government changes in- an annual decline of 5.8 percent in the la- moderate inflation over the medium term. dicate that political deadlock will continue bor force in 2020, with only a partial re- The FY22/23 budget aimed to narrow the to hinder structural reform needed to raise bound in 2021 (4.1 percent). This is largely overall fiscal deficit (7.2 percent of GDP) potential growth and competitiveness. TABLE 2 Kuwait / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices -0.6 -8.9 2.3 5.7 3.6 2.5 Private Consumption 2.3 -4.5 2.9 4.2 3.1 3.0 Government Consumption 7.7 -1.6 3.0 3.8 2.5 2.2 Gross Fixed Capital Investment -2.6 -3.1 0.5 2.0 3.8 3.5 Exports, Goods and Services -10.0 -13.3 3.2 8.6 5.1 2.7 Imports, Goods and Services -10.4 -4.0 3.5 5.0 4.9 3.8 Real GDP growth, at constant factor prices 0.7 -8.9 2.4 5.5 3.4 2.3 Agriculture -4.6 -3.8 0.5 1.0 1.3 1.5 Industry -0.9 -12.2 2.2 6.8 3.1 1.1 Services 3.4 -3.5 2.6 3.5 3.9 4.0 Inflation (Consumer Price Index) 1.1 2.1 3.4 3.6 2.8 2.3 Current Account Balance (% of GDP) 24.4 20.8 25.9 42.4 39.5 26.3 a Fiscal Balance (% of GDP) -9.5 -33.2 -11.4 13.0 5.9 2.6 GHG emissions growth (mtCO2e) 4.9 -7.1 3.3 8.0 4.9 4.9 Energy related GHG emissions (% of total) 77.4 74.3 73.0 72.4 70.9 69.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Fiscal balances are reported in fiscal years (April 1st-March 31st). MPO 17 Apr 22 LEBANON Key conditions and Recent developments challenges Real GDP is projected to decline by 10.5 percent in 2021, on the top of a 21.4 per- Table 1 2021 Lebanon is almost three years into an eco- cent contraction in 2020. A scarce source Population, million 6.8 nomic and financial crisis that is among the of growth is the tourism sector, where GDP, current US$ billion 22.1 worst the world has seen (Lebanon Sink- tourist arrivals surged by 101.2 percent, GDP per capita, current US$ 3263.6 ing (to the Top 3). Nominal GDP plum- from a low base, over the first seven a 78.9 Life expectancy at birth, years meted from close to US$52 billion in 2019 months of 2021. Total GHG Emissions (mtCO2e) 28.8 to an estimated US$22 billion in 2021. The Public finances improved in 2021, para- Source: WDI, Macro Poverty Outlook, and official data. crisis has also led to a triple-digit depre- doxically, as spending collapsed faster a/ Most recent WDI value (2019). ciation and inflation, decimating the coun- than revenue generation. Revenues are es- try’s gross foreign reserve base. timated to have declined from an already The share of the Lebanese population un- low 13.1 percent of GDP in 2020 to a mere Real GDP is estimated to have declined by der the national poverty line estimated to 6.3 percent of GDP in 2021—the third low- 10.5 percent in 2021, on the back of a 21.4 have risen by 9.1 percentage points (pp) by est revenue ratio worldwide in 2021, ahead end-2021. Phone surveys conducted in No- of only Somalia and Yemen. The expen- percent contraction in 2020 as policy mak- vember-December 2021 by the World Food diture contraction was even more pro- ers have still not agreed on a plan to address Program with support from the World nounced, shrinking by 9.2 pp to 7.3 percent the collapse of the country’s development Bank, found that, of households surveyed of GDP in 2021. This partly reflects low in- model. The exchange rate continued to dete- (i) 61 percent reported challenges in ac- terest payments due to the Eurobond de- cessing food and other basic needs, up fault and a favorable arrangement with riorate sharply in 2021, keeping inflation from 41 percent in the same period in 2020; Banque du Liban (BdL, central bank) on rates in triple digits. Politically, Lebanon (ii) 64 percent reported adults restricting domestic debt as well as drastic cutbacks heads into parliamentary elections on May consumption in favor of children; and (iii) in primary spending (falling by 4.3 pp of 15, which are highly anticipated in light of 52 percent have difficulties in accessing GDP over 6M-2021). As a result, the overall health care, compared to 36 percent in the fiscal (primary) balance is estimated to systemic failures in governance. The eco- same period in 2020. have reached -1 percent (0.2 percent) of nomic consequences of the Russian inva- Lebanon has witnessed a dramatic col- GDP in 2021, compared to -3.3 percent (-0.8 sion, war and associated sanctions are lapse in basic services, driven by depleting percent) in 2020. adding to Lebanon’s plights, in particular FX reserves. Acute shortages of fuel for The depreciation of the Lebanese pound given its critical net imports of wheat (qua- both the private and public utilities have (LBP) picked up speed in H2-2021; the US$ led to severe electricity blackouts across banknote exchange rate (BNR) went from si-exclusively from these two countries) the country, with the public utility, EdL, LBP15,000/US$ in June 2021 to breach and oil. Assuming continued no policy re- supplying as little as 2 hours per day. Fur- LBP30,000/US$ in January 2022. This was form, real GDP is projected to contract by ther, medication have at times been in sub- largely due to a disorderly termination of 6.5 percent in 2022. stantial shortages, while health services the FX subsidy, which had covered essen- have suffered heavily. tial imports (fuel, medication, wheat etc.) FIGURE 1 Lebanon / Exchange rate depreciation and rising FIGURE 2 Lebanon / Inflation in basic items has been a key prices driver of overall inflation, hurting the poor and the middle class Index (Aug 2019=100) Contributions to Overall Inflation in 2021, percent 1,800 160 Headline Inflation growth Parallel exchange rate Food & Non-alcoholic Beverages World Bank average exchange rate 140 Transportation 1,500 Water, Electricity, Gas, & Other Fuels Consumer price index 120 Clothing & Footwear Currency in circulation Furnishings, Household Equipment 1,200 100 Health 80 Alcoholic Beverages & Tobacco Communication 900 Education 60 Owner Occupied 40 Actual Rent 600 Other 20 300 0 -20 0 Aug-19 Dec-19 Apr-20 Aug-20 Dec-20 Apr-21 Aug-21 Dec-21 -40 Sources: Lebanese authorities and World Bank staff calculations. Sources: Lebanese authorities and World Bank staff calculations. MPO 18 Apr 22 since end-2019. The World Bank Average in January 2022, as effects of the FX subsidy Inflation rates will remain in triple digits, Exchange Rate (AER) depreciated by 211 removal materialized. Average inflation subdued only by BdL’s ability to control percent in 2021, compared to 250 percent for 2021 is estimated at 150 percent (Figure narrow money supply. depreciation in 2020 (Figure 1). 2)—the 3rd highest globally after The projections come with wide confi- In December 2021, BdL began aggressive FX Venezuela and Sudan. dence intervals attributed to (i) a downside interventions using its gross reserves, man- In October 2021, the Lebanese authorities risk of gross FX reserves depletion, re- aging to bring the BNR back down to and the IMF resumed discussions, which newed COVID-19 outbreaks, higher com- LBP20,000/US$. Nonetheless, dwindling were interrupted for many months since modity prices, especially oil; and (ii) up- FX reserves render such measures non-sus- their initial launch in May 2020. Disagree- side risk if Government agrees to and im- tainable. By December 2021, gross FX re- ments persist on how to account for losses plements a comprehensive macroeconom- serves (excluding gold reserves) at BdL in the financial sector. A critical audit of the ic stabilization and reform program. reached US$17.8 billion (equivalent to 12.6 BdL—necessary to any recovery plan—re- Considering the scale and scope of months of imports), declining by US$6.3 bil- mains a longstanding pending issue. Lebanon’s financial and economic crisis, lion since end-2020. Since this includes the negative impact of the economic conse- around US$5 billion in Lebanese Eu- quences of the Russian invasion, war and robonds, on which the Government default- associated sanctions is of a different mag- ed in March 2020, gross reserves are now Outlook nitude. It is nonetheless large and negative less than required reserves on banks’ cus- as Lebanon will have to quickly tap new tomer FX deposits—estimated at US$14.4 Subject to extraordinarily high uncertain- alternatives for its wheat imports from billion. BdL does not publish net reserves ty, real GDP is projected to contract by a Russia and Ukraine to guarantee food se- data, but these are estimated to be highly further 6.5 percent in 2022 under the as- curity. Additionally, surging energy prices negative (potentially several times GDP). sumptions of continued inadequate macro will further exacerbate already existing, Large exchange rate pass-through effects policy responses and a minimum level of crisis related exchange market pressures, have implied surging inflation, which after stability on the political and security highly elevated inflation rates, and likely falling to 100.6 percent (yoy) in June 2021, scenes. A runaway inflation-depreciation reduce further the limited amount of elec- spiked to a crisis-peak of 240 percent (yoy) spiral, a plausible scenario, is not assumed. tricity supplied by EdL. TABLE 2 Lebanon / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f Real GDP growth, at constant market prices -7.2 -21.4 -10.5 -6.5 Private Consumption -5.9 -15.3 -5.4 -7.2 Government Consumption 6.2 -53.7 -65.9 -28.0 Gross Fixed Capital Investment -40.7 -55.4 -71.0 -54.9 Exports, Goods and Services -1.7 -53.7 -0.4 8.2 Imports, Goods and Services -13.0 -46.0 -15.2 -4.4 Real GDP growth, at constant factor prices -5.9 -17.6 -7.8 -6.8 Agriculture 6.1 53.5 -10.5 0.0 Industry -17.6 -21.8 -10.5 0.0 Services -4.7 -21.7 -7.0 -8.6 Inflation (Consumer Price Index) 2.9 84.3 150.0 120.0 Current Account Balance (% of GDP) -21.9 -9.3 -18.1 -12.8 Net Foreign Direct Investment (% of GDP) 3.4 8.9 6.6 4.9 Fiscal Balance (% of GDP) -10.5 -3.3 -1.0 -1.6 Debt (% of GDP) 171.1 179.2 180.6 272.0 Primary Balance (% of GDP) -0.5 -0.8 0.2 -0.8 GHG emissions growth (mtCO2e) -6.2 -16.1 6.7 -24.4 Energy related GHG emissions (% of total) 73.8 71.2 74.5 67.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 19 Apr 22 Household welfare has continued to dete- riorate due to the loss of jobs and sources LIBYA Key conditions and of income that accompanied the conflict, economic downturn and COVID-19 con- challenges tainment measures. According to the REACH initiative, 63 percent and 49 per- Table 1 2021 Contrary to 2021, when Libya made cent of Libyans and non-Libyans surveyed Population, million 7.0 progress towards ending the decade- in mid-2021, respectively, reported having GDP, current US$ billion 41.6 long conflict and reunifying competing used or exhausted coping strategies clas- GDP per capita, current US$ 5977.9 public institutions in the East and West, sified as crisis or emergency strategies, a 109.0 School enrollment, primary (% gross) the year 2022 has so far brought a re- thereby hindering their capacity to re- a 72.9 turn to political division. National elec- spond to potential future shocks. Life expectancy at birth, years Source: WDI, Macro Poverty Outlook, and official data. tions, originally scheduled for December Results of a World Food Program (WFP) a/ Most recent WDI value (2019). 2021, have been postponed and there is phone survey conducted in August-Sep- no agreement on a new date nor on tember 2021 showed 8 percent of Libyan the legal and constitutional basis for the households have inadequate food con- elections. The eastern-based House of sumption. Food insecurity was highest in Representatives has granted confidence the Southern region. Compared to April to a new cabinet, whereas the Govern- 2021, there was an increase in food insecu- Since the delay of national elections in ment of National Unity considers that rity reported in Tobruk, where 37 percent December 2021, political and security its mandate does not end until nation- of surveyed households had inadequate tensions and oil production disruptions al elections take place. Libya finds itself food consumption. have escalated. The confirmation of a new again with two parallel governments in the East and West, with likely negative cabinet by the House of Representatives implications for policy making, econom- has returned Libya to a state of institu- ic recovery, and security. Recent developments tional division, with two parallel govern- COVID-19 vaccination coverage in ments in the East and West. While soar- Libya remains relatively low. By end- While official national accounts data have February 2022, 31 percent of people been unavailable for much of the conflict ing global oil prices will have a positive in Libya were vaccinated and only 16 period, rough estimates of GDP can be impact on growth and fiscal and external percent were fully vaccinated. made using data on night-time lights, oil surpluses, this hinges on the persistence The consecutive waves of the COVID-19 production and government spending. of oil production. Meanwhile the popula- pandemic have placed a significant strain Estimates reveal that growth rebounded tion faces increasing food insecurity as on the healthcare system which is already in 2021, driven by a significant accelera- battered by the conflict. The United Na- tion of oil production (average of 1.2 mil- global wheat prices rise. tions Office for the Coordination of Hu- lion barrels per day (mb/d) compared to manitarian Affairs (OCHA) estimated that 0.4 mb/d in 2020). However, since mid- over 800,000 people lacked consistent ac- December 2021, there have been multiple cess to primary and secondary healthcare production disruptions due to weather- services in 2021. induced port closures, infrastructure FIGURE 1 Libya / Oil production and exports FIGURE 2 Libya / Real annual GDP growth Thousands of barrels per day US$ million Percent 1,400 4500 225 Non-hydrocarbon 200 4000 Hydrocarbon 1,200 175 3500 Real GDP 150 1,000 3000 125 800 100 2500 75 600 2000 50 1500 25 400 0 1000 200 -25 Oil Production 500 -50 Exports 0 0 -75 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 2006 2008 2010 2012 2014 2016 2018 2020 Sources: Organization of the Petroleum Exporting Countries (oil production) and Sources: Libyan authorities and World Bank staff estimates. IMF Direction of Trade Statistics (exports). MPO 20 Apr 22 maintenance issues, and shutdowns by purchase food. For households that expe- of 34.8 percent of GDP to a surplus of 23.4 armed groups. Oil production in January rienced shocks, price fluctuations and in- percent of GDP in 2020-2021. 2022 recorded its lowest level since Octo- creases (37 percent) rank highest among ber 2020 (1.08 mb/d). the types of shock experienced. Prices of essential goods rose in 2021 and The fiscal balance witnessed a massive re- accelerated during the second half of the versal from a 64.4 percent of GDP deficit Outlook year. The price of the Minimum Expen- in 2020 to a 10.6 percent of GDP surplus in diture Basket (MEB) in December 2021 2021 owing to the jump in oil production It is impossible to forecast economic out- was 12.6 percent higher than in Decem- and prices and the exchange rate devalu- comes with any degree of confidence due ber 2020 and 24.5 percent higher than in ation (much of the spending (particularly to the high level of uncertainty surround- March 2020 at the start of the COVID-19 wages) was denominated in LYD where- ing political and security developments. If pandemic. The rise was especially pro- as 98 percent of revenues in 2021 were oil production and exports continue with- nounced in the West and South. The sourced from hydrocarbons denominated out major extended disruptions, Libya will MEB, measured by the REACH initiative, in US$). Government spending in LYD in- benefit from soaring global oil prices represents the minimum culturally ad- creased by 87 percent in 2021 with rises which will translate into higher fiscal rev- justed items required to support a Libyan across all major budget categories or chap- enues and inflow of hard currency. This household for a month. ters; however, given the 70 percent depre- will positively affect the trade, current ac- Prices of flour are reportedly on the rise ciation of the exchange rate in January count, and fiscal balances. Libya may face in the aftermath of the Russia-Ukraine 2021, this represented a spending drop of short-term wheat supply disruptions, crisis and in the absence of food subsi- 43 percent in USD equivalent. higher wheat prices and in turn higher in- dies. Libya relies significantly on wheat There is no approved budget for 2022 to flation and lower consumption. and cereal imports from Russia and date, and chances for approval of a uni- Downside risks to the outlook are elevat- Ukraine (54 percent of wheat imports, 62 fied government budget soon are low giv- ed. Political tensions relating to national percent of barley imports, and 69 percent en the return to two separate cabinets in elections and rival governments are high, of maize or corn imports). the East and West. which raises the specter of a potential According to an August 2021 survey by Data for the first 11 months of 2021 reveal backslide into violence. A deterioration of WFP, more than half of surveyed house- a trade balance surplus of 52 percent of the security situation or shocks to the glob- holds reported having experienced shocks GDP, driven by the major increase in oil al economy or global commodity prices in the last 12 months, with 38 percent exports and oil prices. The current account would adversely impact economic activity reporting reduced ability to produce or is estimated to have turned from a deficit and household welfare. TABLE 2 Libya / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2018 2019 2020 2021e Real GDP growth, at constant factor prices 15.1 2.5 -31.3 99.3 Hydrocarbon GDP 35.9 4.3 -52.3 203.9 Non-Hydrocarbon GDP 1.8 1.0 -12.8 48.7 Exchange Rate (USD/LYD) 1.4 1.4 1.4 4.5 Current Account Balance (% of GDP) 21.4 11.6 -34.8 23.4 Fiscal Balance (% of GDP) -7.0 1.7 -64.4 10.6 Crude oil production (million barrels per day) 1.0 1.2 0.4 1.2 Sources: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Notes: e = estimate. MPO 21 Apr 22 to health insurance, create a unified cash transfer program for the poor and vulner- MOROCCO Key conditions and able, and improve educational outcomes. challenges Table 1 2021 A strong economic rebound in 2021 has Recent developments Population, million 37.3 enabled Morocco to recover most of the GDP, current US$ billion 128.6 output and job losses caused by the The authorities responded to the GDP per capita, current US$ 3442.4 COVID-19 crisis. However, real GDP is COVID-19 Omicron variant with a suspen- a 4.8 National poverty rate still 6.4 percent below the pre-pandemic sion of international travel from November a 7.3 trend, potential growth has been declin- 29, 2021 to February 7, 2022, one of the Lower middle-income poverty rate ($3.2) a 39.5 ing since the early 2010s, volatile precipi- most stringent measures globally. Accord- Gini index School enrollment, primary (% gross) b 115.2 tations are increasingly affecting the econ- ing to official statistics, new COVID-19 cas- Life expectancy at birth, years b 76.7 omy, and the crisis may leave socio-eco- es have fallen in March 2022 to their lowest Total GHG Emissions (mtCO2e) 98.7 nomic scars if not treated well. level since April-May 2020. Morocco has Morocco’s growth has not been sufficient- achieved one of the highest levels of vac- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2014). ly labor intensive to absorb a growing cination in the African continent, with 63 b/ WDI for School enrollment (2020); Life expectancy working-age population, owing to the percent of the population fully vaccinated (2019). slow pace of structural transformation. as of March. The labor market is characterized by a GDP growth rebounded to 7.4 percent in large informal sector, high rates of inac- 2021 after contracting by 6.3 percent in The economy rebounded in 2021, due to a tivity and low female labor force partic- 2020. This was partly due to an exceptional strong agricultural output, solid exports ipation. This is related to the prevalence cereal crop after two consecutive years of of low-valued-added services, and a diffi- severe drought. Agricultural value-added and remittances, supportive macroeco- cult business environment, especially for grew by 19 percent. The performance of nomic policies, and significant progress on start-ups and young firms. the industrial sector was solid (7.7 percent COVID-19 vaccination. The authorities The authorities recently adopted a New annual growth), while that of services (4.8 adopted a New Development Model, an Development Model that calls for an ambi- percent) was muted by a slow recovery of ambitious reform program that aims to fos- tious and transformative reform agenda. It tourism. On the demand side, growth was envisages an acceleration and diversifica- boosted by consumption, supported by a ter stronger, greener, and more inclusive tion of Morocco’s growth, which in the re- surge in workers’ remittances and recover- growth. They also embarked on ambitious cent past has been heavily reliant on high ing labor markets. reforms in health insurance, social protec- levels of public investment with a relative- Annual inflation remained contained at 1.4 tion, and education. In the short-run, the ly low multiplier effect. Another key chal- percent on average, notwithstanding the lenge is to foster human capital accumu- emergence of imported cost-push pres- authorities will need to address the socio- lation and address long-lasting inequities sures towards the end of 2021. CPI posted economic effects of a severe drought and in access to services and social protection. a 3.6 percent yearly increase in February higher global energy and food prices. To this end, the government has embarked 2022. Bank Al-Maghrib has maintained the on a broad reform to universalize access policy rate at 1.5 percent since June 2020. FIGURE 1 Morocco / Actual and projected real GDP, percent FIGURE 2 Morocco / Actual and projected poverty rates and deviation from 2019 level and pre-COVID-19 forecast real GDP per capita Percent difference in real GDP levels Poverty rate (%) Real GDP per capita (constant LCU) 2 50 35000 0 30000 40 25000 -2 30 20000 -4 20 15000 -6 10000 10 -8 5000 -10 0 0 2018 2019 2020 2021 2022 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Deviation from pre-COVID-19 projection International poverty rate Lower middle-income pov. rate Deviation from 2019 real GDP Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 22 Apr 22 The budget deficit declined from 7.6 to 6 at $1.9 line (2011 PPP) by 26 percent, reach- up global commodity prices, which to- percent of GDP in 2020-2021, as contin- ing 5.7 percent and 0.7 percent. gether with the drought, could push up ued increases in public spending in 2021 Morocco’s import bill and public subsi- - due to the vaccination campaign, high- dies, thereby impacting the current ac- er public sector wages and rising energy count and the budget balance. A weaker subsidies - was more than offset by the Outlook recovery could exert additional pressures rebound in labor income taxes and VAT. on household and firms’ debt servicing The debt-to-GDP ratio declined slightly Growth is projected to slow to 1.1 percent capacity. Inflationary pressures could from 76.4 to 75.6 percent. in 2022, as agricultural output declines force the central bank to raise rates, The current account deficit widened from by 17.3 percent due to another severe which together with changes in the mone- 1.5 to 2.6 percent of GDP in 2020-2021, as drought. The economy is projected to be tary stance of advanced economies would strong exports and remittances (7.8 per- driven by a still solid but moderating in- tighten financing conditions for the public cent of GDP) were more than offset by dustrial performance and a faster recov- and the private sector. growing imports and depressed tourism ery of tourism. Ongoing reforms are ex- Rising prices and decreasing agricultural receipts. The current account deficit was pected to increase potential growth over revenues are expected to slow down the financed by higher net FDI flows and the medium-term. post-COVID-19 normalization of socio- multilateral disbursements. The exchange The fiscal impact of the health and social economic conditions. Poverty and ex- rate has been overall stable, and foreign protection reform and postponement of treme poverty are expected to stagnate reserves increased by 3.3 percent to 6.3 the LPG and flour subsidy reform will in 2022 at best, and will not get back months of imports. slow the consolidation of the budget deficit to pre-COVID-19 levels until 2023. Giv- Following the sharp increase in poverty in (6.2 percent of GDP in 2022). Public debt is en inflationary pressures, especially for 2020, living conditions started to progres- projected to stabilize below 80 percent of food and energy products, as well as the sively normalize in 2021 due to an im- GDP. The current account deficit is expect- impacts of the severe drought, measures provement in labor market performance ed to widen to 5.5 percent of GDP due to to support the most vulnerable as well and the exceptionally good agricultural higher energy and food import bill. as the broader planned social dialogue season. Poverty at $3.2 line (2011 PPP) de- This outlook is subject to various down- will be important measures for Govern- creased by 17 percent and extreme poverty side risks. The war in Ukraine is pushing ment to take. TABLE 2 Morocco / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 2.6 -6.3 7.4 1.1 4.3 3.6 Private Consumption 1.9 -4.1 6.7 2.4 4.4 3.9 Government Consumption 4.8 1.7 5.4 2.7 2.6 2.5 Gross Fixed Capital Investment 1.0 -9.0 9.8 5.7 5.7 4.7 Exports, Goods and Services 6.2 -14.3 4.9 11.2 11.7 10.4 Imports, Goods and Services 3.4 -12.2 9.8 13.2 9.7 9.0 Real GDP growth, at constant factor prices 2.7 -6.1 6.7 1.1 4.3 3.6 Agriculture -4.6 -6.9 19.0 -17.3 16.5 4.9 Industry 3.6 -3.8 7.7 3.3 3.4 3.5 Services 4.0 -7.1 4.8 3.6 3.6 3.7 Inflation (Consumer Price Index) 0.2 0.7 1.4 4.0 1.8 1.7 Current Account Balance (% of GDP) -3.7 -1.5 -2.6 -5.5 -4.0 -3.7 Net Foreign Direct Investment (% of GDP) 1.3 1.4 1.3 1.5 1.5 1.5 Fiscal Balance (% of GDP) -3.8 -7.6 -6.0 -6.2 -5.8 -5.7 Debt (% of GDP) 64.8 76.4 75.6 79.8 79.5 79.6 Primary Balance (% of GDP) -1.5 -5.1 -3.7 -3.9 -3.4 -3.4 a,b International poverty rate ($1.9 in 2011 PPP) 0.7 0.9 0.7 0.7 0.6 0.6 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 5.4 6.8 5.7 5.7 5.2 4.9 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 24.9 29.0 25.8 25.9 24.3 23.1 GHG emissions growth (mtCO2e) 6.3 -4.5 5.3 1.2 3.5 3.3 Energy related GHG emissions (% of total) 69.3 67.9 69.4 69.4 69.8 70.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2013-ENCDM.Actual data: 2013. Nowcast: 2014-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2013) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 23 Apr 22 could potentially undermine the reform momentum. Moreover, Oman is among OMAN Key conditions and the top Arab countries in terms of wheat imports from Russia, therefore, the ongo- challenges ing conflict could cause a higher wheat import bill, which will likely be compen- Table 1 2021 Oman’s economy was hit hard in 2020 by sated by increased hydrocarbon exports Population, million 5.2 COVID-19 and its impact on hydrocarbon receipts induced by the conflict. GDP, current US$ billion 83.6 prices. Despite past diversification efforts, GDP per capita, current US$ 16076.9 public finances and the external sector re- a 104.5 School enrollment, primary (% gross) main dependent on hydrocarbon and thus Life expectancy at birth, years a 77.9 vulnerable to volatility of hydrocarbon Recent developments Total GHG Emissions (mtCO2e) 102.0 prices. To address the persistent twin Source: WDI, Macro Poverty Outlook, and official data. deficits that have resulted in a debt build- Oman’s economy is recovering gradually a/ WDI for School enrollment (2020); Life expectancy up, in 2020 the government embarked on from the dual impact of the pandemic and (2019). an ambitious reform program. These in- the collapse in oil prices. Estimates suggest clude the Medium-Term Fiscal Balance that overall growth reached 2.1 percent in Plan (MTFP) 2020-24, a fiscal consolidation 2021. Hydrocarbon GDP grew by an es- After a difficult 2020, Oman’s economy is program, which aims at putting public timated 2.2 percent, driven by higher oil on a solid recovery path amid easing pan- debt on a sustainable path through in- production due to the easing of OPEC+ creased non-hydrocarbon revenues, ex- cuts since mid-2021 and the coming on demic pressures, higher hydrocarbon out- penditure rationalization and SOE re- stream of a new liquified gas plant in puts, and wide-ranging government re- forms. Other measures to boost the non- mid-2021. Non-oil GDP is estimated to forms. Frontloaded fiscal reforms includ- hydrocarbon tradeable sector would fur- have rebounded by almost 2 percent in ing VAT and cuts in spending are expect- ther support a stronger external position 2021, supported by the recovery of domes- ed to turn the fiscal and current account over the long term. The implementation of tic and external demand aided by in- the MTFP, coupled with ongoing structur- creased vaccine penetration, which boost- deficits into surpluses starting from 2022. al reforms, are expected to facilitate private ed the most impacted sectors by the pan- Downside risks include resurgent pan- sector growth and job creation. demic (tourism, hospitality, and retails). demic pressures, volatility of oil prices, However, key challenges remain. These Annual inflation switched from the 2020 and slower implementation of the govern- include renewed pandemic pressures and negative territory and picked up to an av- volatility of energy prices, which could erage 1.5 percent in 2021, due to the in- ment’s reform program. On the upside, increase gross financing needs and dis- troduction of the VAT last April and im- rising hydrocarbon production, improved rupt the government’s reform program. proved domestic demand. non-oil revenues, and expenditures ratio- Medium-term challenges relate to the on- Public finances improved substantially in nalization would further strengthen fiscal going global transition from fossil to 2021. Higher hydrocarbon revenues to- and external positions. greener energy sources, and its impact gether with fiscal adjustment measures, on Oman’s fiscal and external sustain- such as the streamlining of public expen- ability. Fiscal consolidation could poten- ditures primarily reflecting lower wage bill tially give rise to social tensions, which mainly from mandatory retirement, cuts to FIGURE 1 Oman / Real annual GDP growth FIGURE 2 Oman / General government operations Percentage change Percent of GDP Percent of GDP 10 10 60 Hydrocarbon GDP 8 5 Non-Hydrocarbon GDP 45 6 Real GDP (rhs) 0 4 -5 30 2 -10 0 Overall Fiscal balance 15 -2 -15 Total expenditure (rhs) Total revenue (rhs) -4 -20 0 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 Sources: Oman authorities; World Bank staff projections; and IMF. Sources: Oman authorities and World Bank staff projections. MPO 24 Apr 22 utility subsidies and the introduction of has bounced back, and as of December other GCC producers, may ramp up VAT in April 2021, significantly lowered 2021 it is estimated at about 267,000 com- hydrocarbon output to satisfy the oil the deficit to an estimated 3 percent of pared to an average of about 262,300 in market, thereby providing upside risk GDP, compared with 16 percent in 2020. 2019. By contrast, the number of expatri- to GDP growth. Inflation is forecast to The favorable fiscal outcome is estimated ates employed in the private sector has de- pick up to over 3 percent in 2022 as to lead to a decline in the debt-to-GDP ra- clined considerably, most notably in man- the recovery in demand and the VAT tio to 65 percent in 2021 from over 71 per- ufacturing and construction. impact continue to feed into prices, be- cent in 2020. fore declining to an average of 2 per- Higher hydrocarbon exports, reduction cent in 2023-24. in public investment expenditure, and The fiscal outturn is expected to switch Omanization efforts that led to lower Outlook into a surplus of nearly 6 percent of outward remittances all contributed to GDP in 2022 and to continue improving the marked decline in the current ac- Oman’s economy is expected to improve in 2023-24, due to higher hydrocarbon count deficit estimated to reach less than gradually and strengthen over the medi- revenues and steady implementation of 4 percent of GDP in 2021, compared um-term, supported by higher oil and fiscal adjustment measures. The public with 12 percent in 2020. As a result, the gas production and the ongoing structur- debt-to-GDP ratio is forecast to gradu- central bank gross reserves bolstered to al reforms. Growth is projected to pass ally decline to an average of 38 percent US$19 billion (6 months of imports of 5 percent in 2022 underpinned by more over 2022-24. goods and services) in 2021, a US$5 bil- than 8 percent growth in the hydrocar- Higher oil prices and export diversifica- lion increase from 2020. bon sector, boosted by increased produc- tion are expected to improve the cur- The unemployment rate dropped to 1.9 tion of liquified natural gas in the key rent account balance to a surplus above percent in December 2021, below the pre- Ghazeer and Khazzan fields. The non-oil 5 percent of GDP in 2022 and remain pandemic rate (2.8 percent in December economy will continue to grow, exceed- in positive territory over 2023-24, allow- 2019). Unemployment remains higher ing 2 percent in 2022, as fast vaccine roll- ing the accumulation of gross foreign re- among youth (aged 15-24), and particular- out strengthens domestic activity. Over serves to over US$28 billion on average in ly among young women (25.6 percent). the medium term, growth will deceler- 2022-24 (or 8 months of imports of goods The private sector continues to be the ate to an average of 2.7 percent per year and services). Higher hydrocarbon prices largest contributor to Omanis employ- in 2023-24, while the hydrocarbon sector and continued implementation of struc- ment. After a decline in 2020, the number will remain the main driver of growth. If tural reforms would considerably im- of Omanis employed in the private sector the war in Ukraine escalates, Oman, like prove the outlook. TABLE 2 Oman / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices -0.8 -2.8 2.1 5.6 2.8 2.6 Private Consumption 0.9 -2.0 2.2 4.1 3.0 2.5 Government Consumption 0.3 -3.0 -2.0 -1.4 -1.7 -1.6 Gross Fixed Capital Investment -3.8 -4.3 2.7 4.4 3.8 4.2 Exports, Goods and Services 4.8 -8.0 5.7 8.3 6.0 5.5 Imports, Goods and Services -0.4 -10.5 5.5 6.5 5.9 5.4 Real GDP growth, at constant factor prices -0.8 -2.8 2.1 5.6 2.8 2.6 Agriculture 2.0 3.5 2.4 3.6 3.7 3.7 Industry 1.2 -4.7 1.8 5.8 3.5 1.7 Services -4.2 -0.1 2.5 5.5 1.7 4.0 Inflation (Consumer Price Index) 0.1 -0.9 1.5 3.4 2.1 2.0 Current Account Balance (% of GDP) -5.5 -11.9 -3.7 5.6 5.3 3.4 Fiscal Balance (% of GDP) -5.6 -16.1 -3.0 5.9 6.8 6.1 Debt (% of GDP) 60.5 71.1 65.3 47.0 37.2 30.8 GHG emissions growth (mtCO2e) 2.7 -0.3 21.1 12.9 10.1 -18.1 Energy related GHG emissions (% of total) 84.1 84.0 85.3 86.1 86.5 83.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 25 Apr 22 2022, the Palestinian territories are going through a fifth wave, dominated by the PALESTINIAN Key conditions and Omicron virus. Around 43 percent of the population has received at least one challenges TERRITORIES dose of the vaccine, but estimates sug- gest that there are sufficient vaccine dos- The Palestinian economy was stagnant and es to meet vaccination needs only up to the socio-economic situation already dif- mid-2022. Table 1 2021 ficult prior to the breakout of COVID-19. Population, million 4.9 This is attributed to restrictions by Israel GDP, current US$ billion 18.0 (on trade, movement and access), recur- GDP per capita, current US$ 3664.6 rent hostilities, internal divide, and falling Recent developments Upper middle-income poverty rate ($5.5) a 21.9 aid inflows. During 2017-19, annual GDP a 33.7 growth averaged 1.3 percent—lower than Despite new waves of COVID-19, lock- Gini index b the population growth rate resulting in de- downs were significantly eased in 2021. School enrollment, primary (% gross) 96.4 b creasing per capita incomes and increasing This, combined with the pickup of the vac- Life expectancy at birth, years 74.1 poverty. Growth decomposition shows cination campaign, allowed consumer con- Source: WDI, Macro Poverty Outlook, and official data. that this was driven by accumulation of fidence to slowly pick up and business ac- a/ Most recent value (2016), 2011 PPPs. b/ WDI for School enrollment (2020); Life expectancy factors and not improvements in produc- tivity to gradually rebound. Latest data (2019). tivity. In recent years, gross investment show that the Palestinian economy grew has averaged about 26 percent of GDP, by 7.0 percent in 2021. The improved eco- but the bulk of this has been channeled nomic performance was mostly driven by into activities in the non-tradable sectors, the West Bank, which grew by 7.8 percent, rather than sectors that could have served while the May 2021 conflict in Gaza Following eased lockdowns and an im- as escalators for growth. Likewise, for- slowed the Strip’s recovery resulting in a provement in the health situation in eign direct investment, at a mere 1 per- growth rate of 3.4 percent in 2021. 2021, the Palestinian economy started its cent of GDP, is very low. Inflation began to rise from negative ter- recovery from the pandemic. Despite There is significant regional disparity in ritory in 2020, registering an average of strong revenues, the fiscal situation re- economic activity and income per capita 1.2 percent in 2021 due to a pickup in de- between the West Bank and Gaza. Accord- mand and rising global food and energy mained difficult in 2021 due to very low ing to the latest national household survey, prices. This trend has continued in ear- aid. This forced the Palestinian Authority around 22 percent of Palestinians lived be- ly 2022 with the CPI rising by 2.7 per- to accrue large arrears to the private sec- low the upper-middle income poverty line cent in January, y-o-y. Recently, the Pales- tor, public pension fund and pay partial ($5.5 2011 PPP a day) in 2016/17. Poverty tinians took to the streets of the West is significantly higher in Gaza with 46 per- Bank demonstrating against tax hikes that salaries to its employees. Given the ongo- cent of the population below the poverty the Palestinian Authority (PA) implement- ing pandemic, the outlook remains pre- line in 2016/17 compared to only 9 percent ed on sugary drinks and one-time use carious and subject to additional political in the West Bank. plastics in February 2022, to abide by the and security risks. COVID-19 has exacerbated existing econom- Paris Protocol following similar measures ic and social challenges. As of mid-March on the Israeli side. FIGURE 1 Palestinian territories / New daily COVID-19 FIGURE 2 Palestinian territories / Actual and projected infections and 7-day moving average poverty rates and real GDP per capita New Cases Poverty rate (%) Real GDP per capita (constant LCU) 22500 35 3600 New daily cases 20000 3400 7-day moving average 30 17500 3200 25 15000 3000 12500 20 2800 10000 15 2600 7500 10 2400 5000 5 2200 2500 0 0 2000 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 -2500 International poverty rate Lower middle-income pov. rate Mar-20 Jul-20 Nov-20 Mar-21 Jul-21 Nov-21 Upper middle-income pov. rate Real GDP pc Sources: John Hopkins University CSEE and World Bank staff calculations. Sources: Palestine Expenditure and Consumption Survey (PECS), World Bank staff calculations. MPO 26 Apr 22 Public revenues bounced back with the eco- nearly 8 percentage points from 2016 (lat- on sugary drinks and single-use plastics, nomic recovery, while growth in expenses est available official data). As the impact higher collections on tobacco excise and was limited due to cuts in transfers. The fis- of the pandemic receded, the poverty rate higher VAT revenue due to implementing cal deficit after grants and after accounting is estimated to have declined to 27.3 per- an e-VAT system with Israel. Yet, these ef- for deductions made by Israel from rev- cent in 2021. Current poverty rates repre- forts would be offset by Israeli unilateral enues collected on behalf of the PA nar- sent a poor population of approximately deductions from revenues it collects on be- rowed to 5.8 percent of GDP in 2021 from 7.5 1.5 million people. half of the PA, projected at 1.6 percent of percent in 2020. The deficit was largely fi- GDP in 2022. Expenditure is expected to nanced by the accumulation of arrears to the decline with partial payments of salaries private sector and the public pension fund. until May 2022. With grants, the fiscal The PA also started paying partial salaries to Outlook deficit (on a cash basis) is expected to fall its employees since December 2021. to 4.5 percent of GDP in 2022. The unemployment rate in the Palestinian Under a baseline scenario that assumes a The economic consequences of the Russ- territories edged up to 24.2 percent in Q4 continuation of the Israeli restrictions, per- ian invasion and associated sanctions 2021 from 23.4 percent a year earlier, due sistence of the internal divide between the may also affect the outlook through to a rise in the participation rate. The over- West Bank and Gaza and stagnating aid mounting inflationary pressure. The on- all rate masks a wide regional divergence levels, growth is expected to hover around going pandemic may also cause risks to whereby unemployment in the West Bank 3.7-3.1 percent over the forecast period. the outlook, especially if no additional reached 13.2 percent while in Gaza it was The poverty rate is projected to decline to vaccines are secured beyond mid-2022. 44.7 percent. 26.7 percent in 2022, and then to further Further, if recent clashes between Pales- Estimates based on GDP per capita gradually decrease to 26.1 percent by 2024. tinians and the Israeli forces in the West growth suggest that in 2020 the poverty On the fiscal front, revenue is projected to Bank and in Gaza escalate, there is little rate spiked to 29.7 percent, an increase of grow in 2022, reflecting increased tax rates room left to absorb such shocks. TABLE 2 Palestinian territories / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 1.4 -11.3 7.0 3.7 3.2 3.1 Private Consumption 4.1 -13.1 6.3 4.2 2.9 3.3 Government Consumption -3.5 0.3 11.1 -5.5 7.6 3.0 Gross Fixed Capital Investment -2.6 -20.9 14.7 10.0 1.0 3.0 Exports, Goods and Services 2.0 -11.2 18.8 6.0 3.8 3.8 Imports, Goods and Services 1.4 -14.2 16.6 4.0 3.6 3.6 Real GDP growth, at constant factor prices 1.3 -12.0 6.2 3.7 3.2 3.1 Agriculture 0.9 -9.1 -2.3 3.0 3.0 3.0 Industry -0.5 -19.4 6.2 3.5 3.2 3.2 Services 2.0 -10.0 7.2 3.8 3.3 3.1 Inflation (Consumer Price Index) 1.6 -0.7 1.2 2.8 2.4 2.4 Current Account Balance (% of GDP) -10.4 -12.3 -8.2 -8.1 -8.0 -7.9 Net Foreign Direct Investment (% of GDP) 1.1 0.9 0.0 0.8 0.8 0.8 Fiscal Balance (% of GDP) -7.5 -7.5 -5.8 -4.5 -3.7 -3.5 Debt (% of GDP) 39.5 53.9 54.9 55.8 56.1 56.1 Primary Balance (% of GDP) -7.2 -7.1 -5.1 -3.8 -3.0 -2.8 a,b International poverty rate ($1.9 in 2011 PPP) 0.9 1.4 1.3 1.3 1.3 1.3 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 4.9 7.3 6.6 6.2 6.2 6.1 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 23.1 29.7 27.3 26.7 26.2 26.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2016-PECS.Actual data: 2016. Nowcast: 2017-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2016) with pass-through = 0.87 based on GDP per capita in constant LCU. MPO 27 Apr 22 the North Field East Expansion project in January 2022. QATAR Key conditions and In addition, significant steps have been taken to boost competitiveness in the non- challenges oil economy. These measures include: the abolishment of the Kafala sponsorship sys- Table 1 2021 With more than 75 percent of Qatar’s tem; a new Public-Private Partnerships Population, million 2.8 population vaccinated, recurring bouts of law; the recognition of real estate owner- GDP, current US$ billion 167.9 COVID-19 have had progressively small- ship by non-Qataris and a level playing GDP per capita, current US$ 59964.3 er economic effects and strong growth field with citizens in some commercial ac- a 103.9 School enrollment, primary (% gross) has resumed. Renewed activity ahead of tivities. A non-discriminatory minimum a 80.2 the World Cup has also been strength- wage has also come into force for all work- Life expectancy at birth, years Total GHG Emissions (mtCO2e) 109.0 ened by the ending of the three-year ers; a first among the GCC countries. Source: WDI, Macro Poverty Outlook, and official data. diplomatic rift between Qatar and four a/ WDI for School enrollment (2020); Life expectancy Arab states (Saudi Arabia, UAE, Bahrain, (2019). and Egypt). The recent classification of natural gas as Recent developments a “green” investment by the EU has also The resulting commodity shocks from the spotlighted liquified natural gas (LNG). Economic recovery is well underway and war in Ukraine are on balance positive for Qatar is the world’s largest LNG exporter despite temporary interruptions from and the sharp recovery in oil prices during COVID-19, real GDP grew by 3.0 percent Qatar’s economy, the largest LNG ex- 2021 has been magnified on LNG markets in 2021, versus 3.6 percent contraction in porter in the world. Preparations for the with natural gas prices jumping four times the previous year rebounding in the sec- World Cup scheduled for December 2022 more than oil in Europe; with further steep ond quarter of 2021, at an annualized rate have intensified the diversification of the rises following the war in Ukraine. of 4 percent, and remained positive in the economy and bolstered non-oil activity Hydrocarbon production will remain a third quarter. The Purchasing Managers’ key driver of the Qatari economy. LNG in- Index (PMI) was above 50 during all 2021 despite the COVID-19 pandemic. Hydro- vestments are being expanded in the mar- reflecting economic expansion reaching a carbon dependence, however, is likely to itime and onshore North Field which will highpoint of 63 in November and above expand this decade as the North Field fa- total around US$29 billion and lift produc- 57 since then. Google mobility data had cilities begin production. Possible new tion capacity to 126 million tons per an- a short-lived dip during this most recent num (mtpa) by 2027, up from the current surge of the virus. But retail and recre- outbreaks of COVID-19, a spike in con- production rate of 77 million mtpa with ation, transit station and workplace mo- sumer price inflation and rising US in- more than half beginning within 2024. In- bility, recovered in February 2022 to pre- terest rates, should be modest downside vestments are being brought forward with pandemic levels. risks for the country given high vaccina- QatarEnergy, the state-owned enterprise The fiscal deficit is estimated at 0.9 percent tion rates and sizeable sovereign financial operating all oil and gas activities in the of GDP in 2021, an improvement from a country, awarding large engineering, pro- 2.1 percent recorded in the previous year. wealth and reserves. curement, construction, and installation Recovery in hydrocarbon prices, where the contracts for offshore facilities destined for bulk of government revenues are derived, FIGURE 1 Qatar / Real GDP growth FIGURE 2 Qatar / Public finances Percent, percentage points Percent of GDP 12 50 Oil GDP growth 10 Non-oil growth 40 8 Real GDP growth 30 6 4 20 2 10 0 -2 0 -4 -10 -6 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Fiscal balance Revenue Expenditure Source: World Bank staff calculations. Sources: Haver and World Bank staff calculations. MPO 28 Apr 22 and a gradual unwinding of offsetting ex- growth at or above 4.5 percent in the penditures to mitigate the economic ef- coming years and deepen Qatar’s depen- fects of COVID-19 amongst hardest hit Outlook dence on hydrocarbons. sectors (travel, tourism, and real estate) Continuation of high oil prices with a pre- should continue to improve the fiscal Real GDP is estimated to rise in 2022 to 4.9 mium expected for natural gas in Europe balance and steadily shrink gross public percent on the heels of boosted hydrocarbon from geopolitical tensions, as well as the debt (58.6 percent of GDP at end exports of 10 percent. Growth in private con- EU’s recent classification of this hydrocar- 2021)—gross debt in Qatar needs to be sumption may be slightly below at 4.8 per- bon feedstock as a green target investment, viewed against the 270.0 percent of GDP cent, driven by a potential dilution of World should lead to surpluses for the fiscal bal- in assets accumulated in Qatar’s sover- Cup proceeds and higher prices. Consumer ance in Qatar above 3 percent of GDP into eign wealth fund (QIA) at end-2021 and prices are projected to jump by an additional the foreseeable future. The potential intro- an additional 18.1 percent of GDP in cen- percentage point in the current year. duction of VAT is likely to positively im- tral bank reserves. Both the current account and fiscal bal- pact revenue in the current year and be- Similar to other high income countries ance surpluses are projected to widen in yond. Similarly, the current account sur- impacted by global supply chain inter- 2022 given that both depend about 90 plus is forecast to widen to more than 7 ruptions, Qatar’s consumer price inflation percent on hydrocarbons. A potential up- percent of GDP by 2024 as it is mostly dri- (CPI) has reached highs not seen since side for 2022, linked to the economic con- ven by exports of hydrocarbons, reinforced 2008: 6.4 percent in December 2021 (y/ sequences of the war in Ukraine and Eu- by World Cup tourist receipts. y). This contrasts with deflation during rope’s goal of structurally reducing its With regard to Green House Gas emissions, the COVID-19 lockdowns. At some point, exposure to Russian gas, is a speeding up the forecast is for flat performance in ab- possibly in 2022, Qatar will introduce a of investments in the North Field Nat- solute terms from 5.5 kilo tons of carbon VAT regime which would have a one ural Gas which should see production dioxide (ktCO2) in 2021 to 5.4 in 2024. off impact on prices. As a GCC member increase by 60 percent at mid-decade. Analysis shows the bulk of the emissions to state, Qatar agreed in 2016 to a VAT While non-oil growth is likely to ease in be caused by energy, especially fuel com- regime with a standard rate of 5 percent coming years, the hydrocarbon economy bustion activities (91 percent of the total) but has delayed implementation. should pull up the overall rate real GDP and fugitive emissions (about 5 percent). TABLE 2 Qatar / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 0.8 -3.6 3.0 4.9 4.5 4.4 Private Consumption 3.5 -5.6 4.5 4.8 4.1 4.2 Government Consumption 2.5 10.3 3.6 5.4 4.7 5.0 Gross Fixed Capital Investment 2.5 -3.1 2.3 4.0 3.6 3.7 Exports, Goods and Services 1.1 -6.8 4.1 6.6 7.0 7.1 Imports, Goods and Services 6.0 -2.7 5.5 7.3 7.8 7.8 Real GDP growth, at constant factor prices 0.8 -3.6 3.1 4.9 4.5 4.4 Agriculture 1.0 21.0 5.0 6.0 3.0 3.0 Industry -2.3 -1.5 2.7 3.8 4.2 4.2 Services 7.6 -7.9 3.8 7.2 5.0 4.7 Inflation (Consumer Price Index) -0.9 -2.6 1.0 4.0 2.8 2.3 Current Account Balance (% of GDP) 2.4 -2.5 3.1 4.5 6.1 7.4 Fiscal Balance (% of GDP) 1.0 -2.1 -0.9 3.4 3.3 3.9 Primary Balance (% of GDP) 2.7 -0.2 0.7 4.9 4.7 5.1 GHG emissions growth (mtCO2e) 5.7 -2.1 5.5 5.3 5.3 5.4 Energy related GHG emissions (% of total) 92.0 91.9 91.2 91.2 91.3 91.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 29 Apr 22 tighten in line with the US monetary pol- icy, which will dampen the recent mort- SAUDI ARABIA Key conditions and gage credit boom. challenges Table 1 2021 The war in Ukraine will have sizable Recent developments Population, million 35.3 economic implications globally through GDP, current US$ billion 833.0 multiple channels; most significant for Saudi Arabia continues to successfully GDP per capita, current US$ 23597.7 Saudi Arabia is through energy markets. control the adverse impacts of the pan- a 100.2 School enrollment, primary (% gross) Energy prices have already increased demic despite the Omicron variant out- a 75.1 and are likely to rise further if conflict break at the end of 2021. With a high vac- Life expectancy at birth, years Total GHG Emissions (mtCO2e) 601.9 continues to escalate which may require cination rollout, reaching 68 percent of the Source: WDI, Macro Poverty Outlook, and official data. OPEC+ members to ramp up produc- population, new cases are on a downward a/ WDI for School enrollment (2020); Life expectancy tion—presenting an upside risk to Saudi trajectory since January 2022. Globally, (2019). Arabia’s outlook. Saudi Arabia continues to assume its piv- The government’s long-term strategy to otal role, under the OPEC+ structure, in diversify the economy and reduce depen- resolving oil market imbalances through After registering a stronger-than-expect- dence on oil is well-articulated in Vision waning monthly oil production cuts of 0.4 ed recovery in 2021, the Saudi Arabian 2030. The Public Investment Fund (PIF) mbpd, which started in July 2021. is envisioned to play a central develop- Against this background, latest official da- economy is on an accelerated growth mental role in this transformation plan ta suggest that the economy grew by 3.3 path in 2022; driven by higher oil and by investing SAR 150 billion (US$40 bil- percent in 2021. The oil sector registered non-oil activities as oil production and lion) annually into the domestic economy. growth of 0.2 percent, reflecting a gradual prices strengthen and pandemic pres- This role would require fund’s enhanced easing of voluntary output cuts. The non- sures fade. Direct trade flows with Rus- transparency and predictability for the oil sector continued its recovery path reg- private sector. Moreover, off-balance istering a 5.1 percent growth in 2021 —lift- sia and Ukraine are limited; however, sheet investments reduce overall fiscal ing the non-oil economy by 3.2 percent spillovers in the oil market have oversight and could increase contingent above its pre-pandemic level. More recent strengthened medium-term fiscal and ex- liabilities and fiscal risks. high frequency data report a slight dip in ternal outlook. A breakout of new Risks to the non-oil sector recovery re- January 2022 PMI following the Omicron main. Despite more than two-thirds of the surge, but the economic impact of the Omi- COVID-19 variants, tighter global fi- population fully inoculated against the cron is expected to be short-lived. Head- nancial conditions, and volatile oil COVID-19, a spike in cases due to new line inflation registered 3.1 percent in 2021, prices are key risks to the outlook. variants that are vaccine-resistant would as the VAT-driven impact on inflation dis- risk a cycle of movement restrictions and sipated, but was offset by higher food and delay the recovery. In all cases, the vac- transportation prices. cine rollout should remain the authority’s The budget deficit narrowed in 2021 to 2.1 main priority in the near term. Further- percent of GDP, driven by higher oil rev- more, domestic monetary policy is set to enues and fiscal consolidation measures. FIGURE 1 Saudi Arabia / Annual real GDP growth FIGURE 2 Saudi Arabia / Central government operations Percent change Percent of GDP 15 50 Oil GDP Non-oil GDP 40 10 Real GDP 30 5 20 0 10 0 -5 -10 Budget Balance Revenues Expenditures -10 -20 2017 2018 2019 2020 2021e 2022f 2017 2018 2019 2020 2021e 2022f Sources: GASTAT Saudi Arabia and World Bank staff estimates. Source: World Bank, Macroeconomics, Trade & Investment Global Practice. MPO 30 Apr 22 Tax revenues have also contributed to with rising participation among Saudi tighter fiscal and monetary policies in the this improvement, increasing by 40 per- women (from 26 percent in Q4 2019 to medium term, stronger private consump- cent from 2020, driven by stronger do- 34.1 percent in Q3 2021), unemployment tion, an increase of religious tourism, and mestic demand and full-year collection of rate has also dropped by 9 percentage higher domestic capital spending—sig- the higher VAT rate. On the expenditures points relative to pre-pandemic levels to naled through the PIF and other state side, tighter fiscal policy resulted in ex- an estimated 21.9 percent in Q3 2021. agencies—are anticipated. Headline infla- penditures dropping by 3 percent; with Third, the increase in employment is dri- tion is projected to slow and hover at capital expenditures bearing the brunt of ven by the private sector reflecting strong around 2 percent during 2022 as result of this cut. Thus far, reduction of reserves performance in non-oil activities. Last, a stronger US dollar, against which the and ample market access have proven but not least, foreign workers are leav- Saudi Riyal is pegged, and tighter mone- sufficient to finance the deficit and shield ing, leading to an overall reduction in tary policy. the economy from full volatility of oil employment of almost 900,000 workers The budget balance is expected to register prices; especially, during H1 2021. (Q3 2021 relative to Q4 2019). a surplus of 9.1 percent of GDP in Supported by higher oil export receipts 2022—the first surplus in nine years—dri- and phasing-out of restrictions on reli- ven by higher oil receipts. Fiscal perfor- gious tourism, the current account is esti- mance in the medium term is underpinned mated to register a surplus of 5.2 percent Outlook by authorities’ commitment to compress of GDP in 2021 from a deficit of 2.3 per- expenditures and build credible budget cent of GDP in 2020. Growth is expected to accelerate to 7 per- envelopes. With most of capital spending There is no publicly available informa- cent in 2022 before moderating to 3.8 and channeled through the PIF and other state tion on official poverty rates in Saudi 3.0 percent in 2023 and 2024, respectively. agencies, the overall fiscal stance is more Arabia and access to micro data from Stronger oil output is the main driver be- expansionary than officially reported household surveys is limited. However, hind the recovery which is expected to through the budget. recent statistics point to significant and grow by 13 percent in 2022 following the As higher energy prices and further un- remarkable changes in the labor market. end of the OPEC+ production cuts in De- winding of OPEC+ oil production cuts kick First, Saudi nationals are entering the cember 2022. The non-oil sector is expected in, the current account surplus is projected labor market at high rates driven by to continue its growth trajectory, estimated to widen to 14 percent of GDP in 2022 be- recent reforms; especially, those aimed at 4 percent in 2022 and 3.2 percent in the fore moderating to an average of 9.2 per- at women’s participation. Second, along medium-term. Despite headwinds from cent in the medium term. TABLE 2 Saudi Arabia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 0.3 -4.1 3.3 7.0 3.8 3.0 Private Consumption 4.4 -4.9 3.4 3.0 3.1 2.8 Government Consumption 0.6 2.6 1.8 0.6 0.8 0.6 Gross Fixed Capital Investment 4.9 -14.0 8.2 6.4 7.2 3.3 Exports, Goods and Services -4.5 -8.7 1.4 14.8 5.1 4.7 Imports, Goods and Services 1.3 -14.6 2.7 7.6 5.4 4.3 Real GDP growth, at constant factor prices 0.3 -4.0 3.3 7.0 3.8 3.0 Agriculture 1.3 0.0 0.1 0.2 0.2 0.2 Industry -2.6 -5.3 0.6 8.5 2.8 2.7 Services 4.3 -2.5 7.0 5.5 5.2 3.5 Inflation (Consumer Price Index) -1.2 3.4 3.1 2.0 1.8 1.9 Current Account Balance (% of GDP) 4.7 -2.3 5.2 14.0 11.1 7.3 Fiscal Balance (% of GDP) -4.2 -11.1 -2.1 9.1 5.9 3.8 Debt (% of GDP) 23.1 32.5 29.1 23.5 21.4 19.4 Primary Balance (% of GDP) -3.4 -10.1 -1.2 10.1 6.8 4.6 GHG emissions growth (mtCO2e) -2.2 -4.7 1.1 3.1 1.8 1.3 Energy related GHG emissions (% of total) 77.2 77.2 77.6 77.3 77.5 77.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 31 Apr 22 since the onset of the conflict. With a severely degraded healthcare system fol- SYRIAN ARAB Key conditions and lowing the decade-long war, COVID-19 has only exacerbated the pre-existing vul- challenges REPUBLIC nerable situations. COVID-19-associated deaths continue to rise in Syria, partially Now moving into its eleventh year, the due to a slow vaccine rollout. By the conflict in Syria has continued to inflict a end of February 2022, only 11 percent of Table 1 2021 devastating impact on the inhabitants and the total population received at least one Population, million 17.4 their economy. More than half the coun- dose of the vaccine, and 6 percent was GDP, current US$ billion 16.5 try’s pre-conflict population remains dis- fully vaccinated. GDP per capita, current US$ 947.7 placed, including 6.6 million survivors in School enrollment, primary (% gross) a 81.7 internally displaced people (IDP) status in a Syria and another 5.6 million Syrians regis- Life expectancy at birth, years Total GHG Emissions (mtCO2e) 72.7 44.4 tered as refugees in neighboring countries. Recent developments Although large-scale conflict has subsided Source: WDI, Macro Poverty Outlook, and official data. recently, Syria still recorded 7,465 conflict- The economy continues to suffer from the a/ WDI for School enrollment (2013); Life expectancy (2019). related deaths in 2021, the 9th highest in compounding effects of the health crisis, ad- the world, according to the statistics col- verse weather events, regional fragility, and lected under the Armed Conflict Location macroeconomic instability. Since 2020, Syr- Socioeconomic conditions are deteriorat- & Event Data Project (ACLED). ia’s external economic ties have been se- The social and economic impact of the con- verely restrained by the deepening crisis in ing rapidly in Syria, affected by a range of flict is large and growing. Between 2010 neighboring Lebanon and Turkey as well as shocks, including prolonged armed con- and 2019, Syria’s GDP shrunk by more the introduction of new US sanctions under flict, economic sanctions, COVID-19 pan- than a half. The decline in Gross National the Caesar Law, which triggered shortages demic, a severe drought, deepening eco- Income per capita in Syria has led the of essential goods and rapid currency de- World Bank Group to reclassify Syria as a preciation. The market exchange rate of the nomic crisis in neighboring Lebanon and low-income country in 2018, a reclassifica- Syrian pound against the US dollar weak- Turkey and the economic consequences of tion that highlights the scale of the damage ened by 26 percent year-on-year (yoy) in the Russian invasion, war and associated on Syria’s economy since 2011. 2021, following a 224 percent yoy deprecia- sanctions. The continued depreciation of Conflict, displacement and the collapse of tion in 2020. Given the heavy reliance on im- the local currency has led to rampant infla- economic activities and social services have ports, currency falls have quickly feed into all contributed to the decline in social wel- higher domestic prices, causing hyperinfla- tion, worsening already high food insecuri- fare. Before the conflict, extreme poverty in tion. Annual inflation reached 114 percent ty and pushing more people into poverty. Syria ($1.90 2011 PPP per day) was virtually in 2020, the largest increase in decades. In Conflict, displacement and the collapse of inexistent. It is now affecting more than 50 response to the surge in inflation, the gov- economic activities and social services have percent of the population. On the non-mon- ernment introduced two rounds of wage in- etary front, access to shelter, livelihood op- creases for public sector workers in 2021, all contributed to the decline in welfare for portunities, health, education, water, and but this was not enough to compensate for Syria’s inhabitants. sanitation have all worsened dramatically the erosion of real incomes. FIGURE 1 Syrian Arab Republic / Exchange rate FIGURE 2 Syrian Arab Republic / Work days per month for depreciation along with surging inflation a worker to afford the minimum food basket Percent, YoY change Number of work days per month 350 30 Market exchange rate 300 CPI Food CPI 25 WFP food basket price 250 20 200 150 15 100 10 50 5 0 -50 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 Sources: Central Bureau of Statistics, Syria, WFP Market Price Watch Bulletin, Sources: WFP Market Price Market Price Watch Bulletin and World Bank estimates. and World Bank estimates. MPO 32 Apr 22 Syria’s triple-digit inflation has affected food consumption in December 2021, a especially capital expenditures, will re- the poor and vulnerable disproportionate- rise from 39 percent a year ago. main constrained by low revenues and the ly. Food price inflation—proxied by the lack of access to financing. As a result of World Food Program (WFP) food basket protracted and compounding crises, the price index—rose by 97 percent during international donor community estimates 2021 on the top of a 236 percent increase Outlook that over 60 percent of the Syrians will be in 2020. It is estimated that, on average, in need of assistance in 2022. a low skilled worker would need to work The economic conditions in Syria is project- Risks to the growth outlook are signifi- for as many as 23 days a month to af- ed to continue to be mired by the low inten- cant and tilted to the downside. Owing ford the minimum food basket (sole ba- sity conflict, turmoil in Lebanon and to its heavy reliance on food and fuel im- sic food needs of a family of five). Driven Turkey, the COVID-19 pandemic, and the ports, Syria is particularly vulnerable to by the noticeable increase in commodi- economic consequences of the Russian in- soaring food prices triggered by the eco- ty prices, government subsidies on essen- vasion, war and associated sanctions. A per- nomic consequences of the Russian inva- tial food and fuel goods have dramati- sistent twin deficit would further drain for- sion, war and associated sanctions, which cally risen over the past years, account- eign exchange reserves, putting further would worsen the already acute food in- ing for approximately 40 percent of the pressure on the domestic currency. Inflation security of the country. Should trade total budgeted expenditures in 2021 and is projected to remain high in the short term, flows with Russia be affected, the impact 2022. To compress subsidies, Syria’s gov- due to the pass-through effects of currency would be even greater given Syria im- ernment has tightened rationing, which depreciation, persistent food and fuel ports a significant amount of wheat from has inevitably deteriorated the already shortages, and reduced food and fuel ra- Russia. In addition, economic stagnation dire living conditions of the Syrian peo- tioning. Private consumption will remain and deterioration of public services may ple. According to recent WFP estimates, subdued with continued erosion of pur- lead to an increase in social unrest and close to half of the surveyed households chasing power amid rising prices and cur- conflict, worsening Syria’s already vul- (49 percent) reported poor or borderline rency depreciation. Government spending, nerable political instability. TABLE 2 Syrian Arab Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f a Real GDP growth, at constant market prices 3.7 1.5 -2.1 -2.6 Inflation (Consumer Price Index) 13.4 114.2 89.2 60.0 Fiscal Balance (% of GDP) -7.9 -6.5 -6.8 -7.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. a/ Projections based on nighttime light data. MPO 33 Apr 22 TUNISIA Key conditions and Recent developments challenges GDP grew by an estimated 2.9 percent in 2021, as the successful containment Table 1 2021 A decade after the Jasmin revolution, of the COVID-19 pandemic starting in Population, million 11.9 Tunisia faces increasingly difficult eco- the second semester and increased vac- GDP, current US$ billion 44.2 nomic conditions. Weak reform imple- cination allowed the relaxation of mobil- GDP per capita, current US$ 3701.0 mentation has left the economy ineffi- ity restrictions across the country. The a 15.2 National poverty rate ciently closed to investment and trade economic rebound was relatively modest a 3.0 and ill-equipped to exploit opportunities considering the strong GDP contraction Lower middle-income poverty rate ($3.2) a 32.8 in the global economy. As growth and of 9.2 percent in 2020, the sharpest in Gini index School enrollment, primary (% gross) b 113.4 private job creation stagnated, the State the MENA region. Key factors behind the Life expectancy at birth, years b 76.7 stepped in as an employer of last resort modest recovery include the relative de- Total GHG Emissions (mtCO2e) 34.3 and price stabilizer through subsidies. pendence of the economy on tourism, the This has caused a deterioration of the limited fiscal space and difficult business Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2015). fiscal situation under the weight of a environment, including restrictions on in- b/ WDI for School enrollment (2020); Life expectancy large public sector wage bill, higher vestments and competition. (2019). energy and food subsidies and under- Labor market outcomes remained weak. performing state-owned enterprises. The The already high unemployment rate COVID-19 pandemic has exacerbated reached 18.4 percent by the 3rd quarter of these weaknesses. 2021 combined with a slight reduction in la- Tunisia’s economic outlook remains high- Tunisia’s growth prospects hinge criti- bor force participation. The unemployment cally on timely and decisive structural rate is particularly high among youth, ly uncertain. The economic rebound in reforms to address economic distortions women and in the west of the country. 2021 was relatively moderate. Debt sus- and fiscal pressures. The government Inflation rose to 6.5 percent in 2021, a full tainability concerns remained acute due aims to advance some key reforms in- percentage point above 2020, amid rising to elevated fiscal deficits and financing cluding (i) the elimination of business en- global commodity prices and rebounding needs. As a net importer of energy and ce- try permits and licenses, (ii) the reduc- domestic demand. tion of consumer subsidies; (iii) the im- The fiscal deficit narrowed to an estimated reals, Tunisia is vulnerable to spikes in provement of the performance of state- 7.7 percent of GDP in 2021 from 9.4 percent global commodity prices. Fast-tracking owned enterprises; and (iv) the reduction in 2020. Expenditure hikes related to the the recovery and safeguarding macroeco- of the public sector wage bill. Progress increases in subsidies (particularly energy) nomic stability will require the speedy in these reforms is critical to stabilize the and civil service wages were more than macroeconomic situation, and to secure a offset by a rebound in revenues, mainly implementation of structural reforms. new IMF program which is essential to from indirect taxes. The deficit was fi- mobilize multilateral and bilateral financ- nanced by a combination of debt rollover ing and regain access to international fi- and debt monetization. Public debt rose to nancial markets. 84 percent of GDP. FIGURE 1 Tunisia / Real GDP: Actual, forecast and pre- FIGURE 2 Tunisia / Actual and projected poverty rates and COVID-19 trend real GDP per capita Millions of real TND (2010 prices) Poverty rate (%) Real GDP per capita (constant LCU) 90,000 45 7000 40 85,000 6000 35 80,000 5000 30 25 4000 75,000 20 3000 70,000 15 2000 10 65,000 1000 pre-COVID-19 trend 5 60,000 0 0 History and forecast 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 55,000 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 2024 Upper middle-income pov. rate Real GDP pc Sources: National Institute of Statistics; World Bank. Source: World Bank. Notes: see Table 2. MPO 34 Apr 22 The current account deficit (CAD) stood at by pre-existing structural weaknesses and pose significant downside risks to the 6.5 percent of GDP in 2021, a slight deterio- the economic consequences of and un- Tunisian economy. As a net commodity ration from 6.1 percent in 2020. This result- certainty around the Russian invasion of importer, continued upsurges in energy ed from the expanding trade deficit as im- Ukraine and associated sanctions. and food prices would add further pres- ports increased more than exports, compen- Tunisia’s public finance and external ac- sure on Tunisia’s external account sated for by a 28 percent rise in primary in- count will remain precarious in the absence through higher import bills, while higher come (mainly remittances). The strong in- of an IMF program and uncertain global subsidy costs could weigh heavily on the crease in imports was driven by the growth conditions. The CAD is projected to widen fiscal position. Energy subsidies would in domestic demand linked to the increase significantly to 7.6 percent of GDP in 2022, increase by 3.9 percent of GDP if the av- in public expenditures and in exports. driven by surging energy and food prices. erage price of oil in 2022 were to increase Despite some fiscal consolidation ef- to $115 per barrel as in the immediate af- forts—including two rounds of fuel price termath of the Russian invasion. Cereal increases in February and March 2022—the subsidies would increase by 0.2 percent Outlook fiscal deficit would remain high at a project- of GDP if wheat prices were to increase ed 6.1 percent of GDP in 2022. Gross public by 20 percent relatively to their Novem- Growth is projected to reach 3.0 percent financing needs are projected at around ber 2021 levels. in 2022, supported a gradual global re- TND 20bn in 2022 (US$6.9 billion; 14.7 per- Poverty is expected to reach 3.4 percent in covery from the pandemic. This rate cent of GDP), half of which is for external 2022 and 3.1 percent in 2023 using the $3.2 would not yet allow output to return to amortization. Inflationary pressures, stem- line (2011 PPP). The number of poor and pre-pandemic levels of 2019. Growth is ming from rising commodity prices, will vulnerable at $5.5 line (2011 PPP) is pro- expected to eventually gain ground, but constrain further debt monetization. jected to decline from 18.9 percent in 2022 it remains modest at around 3.5 percent The economic consequences of the Russian- to 17.7 percent in 2023 and is not expected a year over the medium term, dragged Ukrainian war and associated sanctions to go back to pre-crisis levels before 2024. TABLE 2 Tunisia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 1.4 -9.2 2.9 3.0 3.5 3.3 Private Consumption 2.3 -5.1 2.0 3.0 4.5 4.0 Government Consumption 2.4 -5.3 1.9 3.5 1.3 1.6 Gross Fixed Capital Investment 0.5 -28.7 1.7 6.3 4.1 4.8 Exports, Goods and Services -4.1 -20.4 10.3 5.9 8.0 8.0 Imports, Goods and Services -6.9 -19.3 8.0 7.7 9.0 9.0 Real GDP growth, at constant factor prices 1.5 -9.8 3.0 3.1 3.5 3.3 Agriculture 5.7 0.4 -5.4 -4.6 4.0 4.0 Industry -1.4 -9.3 7.5 8.5 3.5 3.2 Services 2.1 -11.4 2.6 2.0 3.5 3.2 Inflation (Consumer Price Index) 6.7 5.6 6.5 6.5 6.5 6.0 Current Account Balance (% of GDP) -8.1 -6.1 -6.5 -7.6 -7.2 -6.9 Fiscal Balance (% of GDP) -2.9 -9.4 -7.7 -6.3 -5.6 -3.9 Debt (% of GDP) 67.9 79.5 84.5 84.2 90.6 91.0 Primary Balance (% of GDP) -0.4 -5.8 -4.7 -3.1 -2.5 -0.6 a,b International poverty rate ($1.9 in 2011 PPP) 0.2 0.3 0.3 0.3 0.3 0.2 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 2.9 3.7 3.5 3.4 3.1 3.0 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 16.6 20.1 19.5 18.9 17.7 17.0 GHG emissions growth (mtCO2e) 0.7 -8.5 -0.3 3.3 2.1 1.9 Energy related GHG emissions (% of total) 73.0 71.7 71.2 71.5 71.5 71.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on 2015-NSHBCSL.Actual data: 2015. Nowcast: 2016-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2015) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 35 Apr 22 Dhabi’s GRE debt increased by 30 percent from 2017 to US$64.2 billion in 2020, while UNITED ARAB Key conditions and Dubai’s GRE debt was US$51 billion in 2020 (IMF). Despite changes in the com- challenges EMIRATES position of debt, i.e., a shift from loans to bonds and lengthened maturity profiles, Over the past decade, the authorities have Abu Dhabi and Dubai GREs face short- intensified efforts to diversify the econo- term rollover risks with a combined Table 1 2021 my, successfully positioning the UAE as US$68.8 billion debt in 2021-23. GRE debt Population, million 10.0 the region’s trade, financial and travel hub. servicing capacity is low and GRE risks GDP, current US$ billion 464.9 Through economic visions and plans, the could be exacerbated by a prolonged pan- GDP per capita, current US$ 46490.0 UAE aims to diversify the economy and demic and/or tightening global financial School enrollment, primary (% gross) a 115.4 build on its reputation as a business hub, conditions. Contingent fiscal risks from a 78.0 while promoting environmental sustain- GREs should be closely monitored and Life expectancy at birth, years ability. However, the UAE will increasing- pre-emptively mitigated and GRE efficien- Total GHG Emissions (mtCO2e) 205.8 ly face greater competition for foreign in- cy and productivity must be improved. Source: WDI, Macro Poverty Outlook, and official data. vestment, especially from Saudi Arabia a/ WDI for School enrollment (2020); Life expectancy (2019). and Qatar. Moreover, while the non-hy- drocarbon sector accounts for two-thirds of GDP, the economy continues to rely on Recent developments The UAE led the world with a successful hydrocarbon activity as the engine of growth and the main source of govern- Real GDP growth is estimated at 2.8 per- vaccination program, which, together ment revenue, and thus the economy re- cent in 2021 following a contraction of 6.1 with the gradual phasing out of OPEC+ mains vulnerable to oil price volatility. percent in 2020. The recovery was aided by oil production cuts and monetary and fis- Nevertheless, authorities continue to press a successful vaccination program, and fis- cal stimulus, led to a strong economic re- forward to enhance its business environ- cal and monetary stimulus measures that ment through, for instance, improved helped the rebound of domestic consump- covery in 2021. Over the medium term, bankruptcy provision and easier access to tion. Dubai quarterly GDP registered a the recovery will be bolstered by higher oil foreign investment and workers. growth of 6.3 percent Y-o-Y in Q3-2021. In prices triggered by the economic conse- Steps towards diversifying public rev- Dubai hotel occupancy increased, owing quences of the war in Ukraine. The au- enues are also underway with the recent mostly to the resumption of internation- thorities continue to make progress on fis- introduction of a corporate income tax al travel. The Purchasing Manager’s Index (CIT) effective in 2023—a major shift for (PMI) for October 2021 registered its high- cal and economic diversification. Risks in- a country historically known for low taxa- est reading since June 2019, with a score clude renewed coronavirus outbreaks, tion. This may provide Dubai with greater of 55.7 supported by increased activity re- tightening global financial conditions, resources if corporate debt problems resur- lated to Expo 2020 and loosening of and oil sector volatility. face. The UAE’s government related enti- COVID-19 restrictions. The recovery is ex- ties (GRE’s) remain a significant source of pected to strengthen in 2022 despite a vulnerability. The ability of GREs to meet short-term dampening of sentiment due to their debt obligations is uncertain. Abu the Omicron variant as indicated by a FIGURE 1 United Arab Emirates / Annual real GDP growth FIGURE 2 United Arab Emirates / Composite purchasing manager's index Percent change Composite PMI: Total Economy (SA, 50+=Expansion) 10 60 8 58 6 56 4 54 2 52 0 50 -2 48 Oil GDP -4 46 Non-Oil GDP -6 44 Real GDP growth -8 42 2013 2015 2017 2019 2021e 2023f Jan'19 Jul'19 Jan'20 Jul'20 Jan'21 Jul'21 Jan'22 Sources: UAE authorities and IMF/World Bank staff estimates. Sources: IHS Markit Purchasing Managers Survey. MPO 36 Apr 22 slight dip in January’s PMI. The hydro- five years, while declining in Dubai at a revival is a policy priority. Russia became carbon sector also picked up pace as marginal pace. the third-largest source market for Dubai’s OPEC+ production quotas were eased; oil The current account balance improved to travel and tourism sector in 2021, while production went up by 8 percent in 6.8 percent of GDP in 2021 in tandem with Ukrainian tourists are among the top 20, Q4-2021 compared to Q2-2021. The health improved performance of both hydrocar- which presents a downside risk for its non- situation is improving with daily new bon and non-hydrocarbon exports mitigat- oil recovery. cases below 800 in February 2022 (on a ed by higher imports. Recent efforts to deepen equity markets, 7-day rolling average basis) for the first Understanding of poverty, inequality, encourage technology businesses and time since 2020 and over 95 percent of the and livelihoods in the UAE continues to boost the industrial sector coupled with population is fully vaccinated. be limited due to sparse representative a recovery in global trade, rising oil pro- Government finances improved in 2021; household and labor data. According to duction and higher oil prices, will sup- fiscal outturns for the federal government data from the UAE Central Bank, em- port recovery in the medium term. Re- showed a return to a surplus (estimated at ployment in Q3 2021 remained at the forms to improve the business environ- 2.4 percent of GDP) from a deficit of 2.5 same level of the previous quarter and ment such as the new labor code will in- percent of GDP in 2020. The consolidated above pre-pandemic levels. crease labor market flexibility and attract deficit is estimated to have improved from expats. As OPEC+ quotas are eased and 5.4 percent of GDP in 2020 to 0.5 percent in with higher oil prices and the introduc- 2021. Financing needs were mostly met by tion of CIT, fiscal balances will receive a international debt issuances at the emirate Outlook boost. A robust expansion of trade aid- and federal levels. ed by a renewed push by the authorities Inflation returned in 2021 after two con- The economic consequences of the war in to increase reexports to Asia and Africa secutive years of deflation, owing to rising Ukraine have triggered an oil price surge will expand the current account surplus. global food and energy prices, higher local which will have positive implications for Higher energy prices will increase infla- property prices, and a continuing recovery the UAE economy and its fiscal and ex- tion in 2022 but easing supply bottlenecks in domestic demand. Residential real es- ternal balances. However, tourism and and gradual monetary policy tightening, tate market continues to improve, with the non-oil economy might face head- in line with the US Fed’s hike and contin- prices in Abu Dhabi registering Y-o-Y winds. Tourism and travel account for al- uing tightening cycle, should soften infla- gains for the third consecutive quarter in most 20 percent of Dubai's GDP, and their tion over the medium term. TABLE 2 United Arab Emirates / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 3.4 -6.1 2.8 4.7 3.4 3.6 Private Consumption 10.0 -12.5 5.1 3.8 3.7 4.0 Government Consumption 10.0 0.7 1.7 2.7 2.9 2.9 Gross Fixed Capital Investment 0.0 5.8 3.9 3.4 3.9 4.0 Exports, Goods and Services -1.3 -7.0 6.7 5.9 5.1 5.2 Imports, Goods and Services -5.5 -6.4 8.8 5.4 4.5 4.5 Real GDP growth, at constant factor prices 3.4 -6.1 2.8 4.7 3.4 3.6 Agriculture 3.8 6.9 3.8 4.6 4.9 4.9 Industry 2.6 -5.5 0.4 6.6 3.5 2.9 Services 4.2 -6.9 5.1 2.8 3.1 4.2 Inflation (Consumer Price Index) -1.9 -2.1 0.2 2.2 1.9 1.7 Current Account Balance (% of GDP) 8.5 6.0 6.8 13.7 11.8 11.3 a Fiscal Balance (% of GDP) -1.0 -5.4 -0.5 4.4 5.0 2.7 GHG emissions growth (mtCO2e) -2.1 -9.4 -1.6 0.6 0.1 0.4 Energy related GHG emissions (% of total) 71.7 69.9 69.2 68.6 67.7 67.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Consolidated fiscal balance. MPO 37 Apr 22 With only 50 per cent of Yemen’s health facilities functional, the COVID-19 pan- REPUBLIC OF Key conditions and demic placed additional pressure on the country’s already fragile health system. challenges YEMEN Vaccination efforts are underway, but so far only two per cent of the population After almost seven years of escalating has been vaccinated. conflict, Yemen continues to face an un- Table 1 2021 precedented humanitarian, social and Population, million 30.5 economic crisis. Significant damage to vi- GDP, current US$ billion 21.1 tal public infrastructure has contributed Recent developments GDP per capita, current US$ 690.4 to a disruption of basic services, while in- School enrollment, primary (% gross) a 93.6 security has delayed the rehabilitation of Available information suggests that the a 66.1 oil exports—which had been the largest Yemeni economy continued to weaken Life expectancy at birth, years source of foreign currency before the in 2021, affected by macroeconomic in- Total GHG Emissions (mtCO2e) 22.5 war—severely limiting government rev- stability (especially in southern gover- Source: WDI, Macro Poverty Outlook, and official data. enue and supply of foreign exchange for norates), escalating hostilities, and a/ Most recent WDI value (2019). essential imports, including fuel. The bi- heavy rains and flooding, which dam- furcation of national institutions between aged shelters and infrastructure, de- the conflicting parties—the international- stroyed livelihood, and facilitated the Economic conditions continue to deterio- ly recognized government (IRG) based spread of diseases such as cholera. The rate, and acute humanitarian crisis per- in Aden and de-facto authorities in volume of oil production remained sig- sists. The bifurcation of economic insti- Sana’a—and uncoordinated policy deci- nificantly below the pre-conflict levels, tutions by conflicting parties, and the sions have further compounded the eco- notwithstanding slight improvements in nomic crisis and humanitarian suffering recent years. Non-oil economic activity uncoordinated policy decisions have fur- from violence. continues to suffer from hostilities, in- ther compounded the socio-economic cri- Reliable information on the economy terruption of basic services (electricity, sis stemming from active conflict, now is absent, as official statistics are no telecommunications), and acute short- in its seventh year. Donor fatigue, soar- longer produced. Yemen’s economy is ages of inputs, which were compounded largely informal and relies on remit- by double taxation and distortions cre- ing global commodity prices, and ad- tances and aid inflows to fund con- ated by uncoordinated policy decisions verse climate conditions will continue to sumption. Agriculture dominates the by the two authorities. pose serious threat to the already dire real economy (after the collapse of the Yemen’s public finances remain under se- socio-economic conditions. oil sector) but suffers from an increas- vere stress. During 2021, continued mon- ing frequency of climate- and pest-re- etization of the fiscal deficit in the IRG lated disruptive events. and STC-controlled areas, coupled with The social conditions are precarious, with rising global commodity prices, fueled the UN estimating more than 24 million inflation and put a significant downward people (some 80 percent of the popula- pressure on the currency in the southern tion) in need of humanitarian assistance. governorates. The suspension of external FIGURE 1 Republic of Yemen / Real GDP (indexed): FIGURE 2 Republic of Yemen / Exchange rate trend: Yemen and comparators Yemen (Sana’a and Aden) RGDP Index (2010=100) Exchange rate (YER/USD) 150 1800 Yemen Sana'a Middle East & North Africa 1600 125 Aden Low income 1400 FCSs 100 1200 World 1000 75 800 50 600 400 25 200 0 0 1990 1995 2000 2005 2010 2015 2020 1-May-18 1-Jan-19 1-Sep-19 1-May-20 1-Jan-21 1-Sep-21 Source: MFMod, World Bank. Sources: IMF and Central Bank of Yemen. MPO 38 Apr 22 public debt services remained in place dollar has remained relatively stable in except for payments to IDA and IMF. the absence of monetary expansion, as a Fiscal policy by the de facto authorities result of cash budgeting and a ban on the Outlook in Sana’a, the country’s main commer- use of new banknotes printed after 2016. cial and financial center, is operating Sharp depreciation and soring global food Economic and social prospects in 2022 and under a cash budget system. Given the prices substantially strained the humani- beyond are highly uncertain and hinge crit- lack of hydrocarbon revenue, the scale tarian crisis from an already dire situation. ically on a resolution of the conflict and the of fiscal policy in Sana’a is smaller and Importantly, food access is materially overall security conditions. In this context, mostly depends on revenue from corpo- worse in the southern governorates, where the flare-up of conflict, coupled with surg- rate profit tax. the rial plunged substantially during most ing international oil prices, would be detri- Competing monetary policies by the of the 2021. mental to the private sector’s operational en- two conflicting authorities have result- The economic consequences of the Russ- vironment. On the upside, robust growth in ed in a large divergence of the ex- ian invasion, war and associated sanc- GCC countries driven by rising global ener- change rate of the Yemeni rial. In the tions, on Yemen are expected to be gy prices may boost remittance flows to southern governorates, the rial depre- broadly negative. In the short term, re- Yemen. Revenue generation in Yemen as a ciated by over 100 percent against the duced imports of key commodities, on whole will continue to be deeply challenged US dollar by early December 2021 (y- account of a supply side shock, by an extremely low tax base. Trade will con- o-y). The introduction of a foreign ex- and—over both the short and medium tinue to be negatively affected by blockages change auction mechanism – since mid- term—increased oil and food prices, will of shipment offloading, infrastructural November 2021 – coupled with the ap- weigh heavily on the trade balance, in- damages to the port facilities, and pervasive pointment of new central bank manage- flation, and household consumption. The shortage of foreign exchange. Risks to the ment in Aden on December 6, 2021, con- negative effects will be partially offset by socio-economic outlook are related to po- tributed to reverse the falling trend, al- some improvements on the fiscal front tential economic sanctions by the US, elevat- lowing the rial to stabilize since January and on remittances—on account of higher ed cost of wheat imports, and a decaying oil 2022. The sentiment also improved on ac- global crude oil price (which Yemen ex- tanker in the Red Sea. The latter could cause count of the expected conversion of (at ports). Millions may face severe food lasting environmental and economic dam- least part) of the recent IMF SDRs al- consumption gaps due to rapidly increas- ages, by affecting one of the world’s richest location to Yemen, which is expected to ing levels of need, which could turn an and most biodiverse marine ecosystems in take place shortly. In the northern gover- already dire food crisis into a catastro- the Red Sea, with long-term implications for norate, the exchange rate against the US phe, if assistance is not scaled up. Yemen’s fisheries and shipping sectors. TABLE 2 Republic of Yemen / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f Real GDP growth, at constant market prices 1.4 -8.5 -2.1 0.8 2.5 a Inflation (Consumer Price Index) 10.0 35.0 85.1 31.7 15.0 Current Account Balance (% of GDP) -3.9 -6.9 -3.0 -9.3 -9.0 Fiscal Balance (% of GDP) -5.6 -5.2 -4.9 -5.5 -5.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. a/ Inflation rates refer to end-of-period figures. MPO 39 Apr 22 Macro Poverty Outlook 04 / 2022