Mustafa Abdel Azim (Dubai)
The World Bank confirmed the ability of the UAE economy to continue its growth momentum, away from the slowdown in the global economy, which prompted the Bank to reduce its forecast for global growth this year to 2.9%, compared to its forecast in January, estimated at 4.1%.
In its World Economic Prospects report issued yesterday, the World Bank established its previous forecast for the growth of the UAE economy this year at 4.7%, with the UAE benefiting from high oil prices in the near term, pointing to reforms related to deepening capital markets, increasing labor market flexibility and accelerating the pace of Technological innovation will support growth in the medium term, with growth expected in 2023 and 2024 to reach 3.4% and 3.6%, respectively.
The Middle East
As for the Middle East, the report indicated that the average growth rate in the region, which reached 5.3% in 2022, which represents the fastest pace in ten years, hides a large disparity and a trend in the wrong path, as the growth rate will suddenly slow down in 2023 and 2024 in various countries of the region.
In its report, the Bank attributed the current recovery mainly to the strong growth in the oil-exporting countries, driven by the rise in oil revenues and a general decline in the negative effects of the pandemic in the countries that achieved high vaccination rates.
The Bank expected that the economies of the Gulf Cooperation Council countries will achieve a growth of 5.9% in 2022, which is an increase of 1.2 percentage points than was expected at the beginning of the year. It is likely that the strong growth in oil production in Saudi Arabia will lead to a strong recovery in the non-oil sector to push the rate Growth in 2022 will reach 7%, its highest level in ten years, before declining to 3.8% in 2023.
war in ukraine
The World Bank said in its report: The war in Ukraine, along with the damage caused by the Corona Virus (Covid-19) pandemic, has exacerbated the slowdown in the pace of the global economy, which is entering into what might become a prolonged period of weak growth and high inflation, and this In turn, it increases the risks of stagflation, with potentially damaging consequences for middle and low-income economies alike.
In its report, the World Bank expected global growth to decline from 5.7% in 2021 to 2.9% in 2022, which is much lower than the 4.1% expected in January. It is also expected that global growth will continue to swing around that pace during the period from 2023 to 2024, at a time when the war in Ukraine disrupts economic activity, investment and trade in the short term, and weakens pent-up demand, as well as ending the accommodative fiscal and monetary policies.
As a result of the damage caused by the pandemic and war, the level of per capita income in developing economies this year will remain regarding 5% lower than its trends that prevailed before the outbreak of the pandemic.
stagflationary risks
“The war in Ukraine, the lockdowns in China, the disruptions in supply chains, and the risks of stagflation are taking huge blows to global growth, so it will be difficult for many countries to avoid recession risks,” World Bank President David Malpassanya said. It is necessary to encourage production and avoid the imposition of trade restrictions, and there is a need to make changes in fiscal, monetary, climate and debt policy, in order to counteract capital misallocation and inequality.”
According to the report, global inflation is expected to decline next year, but will likely remain above inflation targets in many economies, and the report indicates that if inflation remains high, repeating decisions of the previous stagflation period might translate into a sharp decline in global economic activity. Along with financial crises in some emerging market and developing economies.
