Home Business World Bank warns of possible economic slowdown in some MENA countries due to double-digit food inflation

World Bank warns of possible economic slowdown in some MENA countries due to double-digit food inflation

According to a report by the World Bank, the GDP growth rate of MENA countries is expected to decline from 5.8% in 2022 to 3% in 2023.


The World Bank has published its latest economic update, titled “Altered Destinies: The Long-Term Effects of Rising Prices and Food Insecurity in the Middle East and North Africa”, which predicts that economies in the Middle East and North Africa (MENA) will grow at a slower pace in 2023, due to double-digit food inflation, which is adding pressure on poorer households. The report estimates that food insecurity in the region can span generations, with the human and economic cost of inaction being immense. The report forecasts that MENA’s GDP will slow to 3% in 2023, from 5.8% in 2022, with oil exporters experiencing slower growth. However, there remains a large gap between high-income countries and the rest of the region. Real GDP per capita growth, which is a better proxy for living standards, is expected to slow down to 1.6% in 2023, from 4.4% in 2022.

Inflation in the region rose dramatically in 2022, particularly in countries that experienced currency depreciations. The report focuses specifically on the impact of food price inflation on food insecurity, finding that eight out of 16 countries suffered from double-digit food price inflation or higher, affecting poorer households the most as they spend more of their budgets on food than those that are better off.

According to the report, the average year-on-year food inflation across 16 MENA economies between March and December 2022 was 29%. This was higher than headline inflation, which rose on average to 19.4% year-on-year during that period, compared to 14.8% between October 2021 and February 2022, the month of Russia’s war against Ukraine. Across all four MENA subgroups covered in the report — developing oil importers, developing oil exporters, conflict countries, and the GCC — inflation accounts for 24% to 33% of 2023’s forecasted food insecurity.

“The report estimates that close to one out of five people living in developing countries in MENA is likely to be food insecure this year and that almost eight million children under five years of age are among those who will be hungry. Food price inflation, even if it is temporary, can cause long-term and often irreversible damage,” said Roberta Gatti, World Bank Chief Economist for the MENA region.

The increase in food prices from March-June 2022 may have increased the risk of childhood stunting by 17-24% in developing countries in MENA, which translates to about 200,000 to 285,000 newborns who are at risk of stunting. More generally, research shows that child malnutrition leads to poor performance in school, lower incomes, and poorer health.

The report suggests policy tools that could help to alleviate food insecurity before it escalates into a full-blown crisis, including targeted cash and in-kind transfers that could be introduced immediately to stem acute food insecurity. Mothers, who play a vital role both in utero and in early childhood, would benefit from improved parental leave, childcare, and medical care, which are important for a child’s development.

Projected financing needs to address severe food insecurity run into billions of dollars annually, but the report makes clear that money alone is not enough. Improved and more current data on the state of childhood health and nutrition are needed, along with better access to administrative information that would help target priorities and reach vulnerable populations more easily. Making food systems more resilient and strengthening supply chains, especially in the face of climate and future market shocks, is essential, the report concludes.

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