The Arab economies are forecasted to witness a gradual recovery and to grow around 2.8% and 3.6%in 2021 and 2022, respectively, said the Arab Monetary Fund (AMF) releases the April edition of the "Arab Economic Outlook" report for 2021.
Several factors will support this recovery, including the improved external demand, the anticipated rise in commodity prices, and the positive impact of economic reforms. The continuation of the expansionary fiscal and monetary policies and the stimulus packages to boost the aggregate demand in some Arab countries, especially those with adequate fiscal space, will also support economic recovery in 2021 and 2022.
In this context, oil-exporting Arab economies are anticipated to grow by 2.9% during 2021 in light of the anticipated increase in oil production levels and its prices in international markets and the continuation of the stimulus packages in some countries within this group especially the GCC countries.
The growth of this group of countries is expected to rise to 3.6% in 2022, benefiting from the positive impact of reforms aimed at increasing economic diversification and encouraging private sector participation in output and job creation in a number of these countries.
The Arab oil-importing economies are expected to grow by 2.8% and 4% in 2021 and 2022, respectively supported by the expected improvement in external demand and solid domestic demand levels in some of these countries and the positive impact of economic reforms implemented in a number of these countries.
The inflation rate for Arab countries as a group is expected to decline to about 10.6 and 5.9% in 2021 and 2022, respectively. This comes in line with easing the precautionary measures in many Arab countries with the widespread availability of vaccines and the expected increase in the supply of goods and services.
On the monetary policy side, a number of Arab central banks are expected to adopt expansionary monetary policies to support the economic recovery during 2021 and 2022 by keeping monetary policy interest rates at low levels.
In addition, Arab central banks will continue their efforts to intervene through the rest of other monetary policy tools to ensure the availability of adequate levels of liquidity in the local and foreign currencies in a way that will not only target supporting economic recovery but also ensuring banking soundness and financial stability. On fiscal policy, the consolidated budget deficit is expected to decline to 8.7% of GDP in 2021, reflecting the anticipated positive impact of fiscal reforms.
On the external sector, the trade balance of Arab countries will benefit from the improved performance of commodity exports and the positive impact of measures taken by some Arab countries to rationalize merchandise imports, especially consumer goods. It is also expected that the current account balance of the Arab countries as a group will benefit from a relative and gradual increase in service receipts in light of the expected easing of the restrictions imposed to contain the Pandemic.
Consequently, it is expected that the current account balance of Arab countries as a group will record a surplus of about 4.8 billion dollars, representing about 0.2% of the GDP in 2021. The current account surplus is expected to improve to 41.6 billion dollars in 2022, equivalent to about 1.6% of the GDP of the Arab countries as a group.
With the availability of anti-virus vaccines, hopes for a gradual recovery of the global economy have revived, as the world economy is expected to grow by 4.5 and 3.8% in 2021 and 2022, respectively, according to the average of international institutions’ estimates.
On the other hand, the international oil markets are expected to witness an increase in demand for oil by 5.8 million barrels per day during 2021 to support the gradual global economic recovery. This will work in conjunction with the continuation of the "Opec+" agreement to reduce the quantities of oil produced on supporting its prices in international markets.
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