Economic growth in Egypt will slow “significantly” and political unrest spreading across the Middle East and North Africa will hurt other economies in the region this year, the International Monetary Fund said.
Egypt’s gross domestic product will expand about 1 percent, the IMF said in its World Economic Outlook report released today, cutting the forecast from 5 percent after the uprising that ousted President Hosni Mubarak in February. The economy of Tunisia, where Zine El Abidine Ben Ali was driven from office a month earlier, will grow 1.3 percent this year, the IMF said. Average growth across the region is projected at 4.1 percent.
“Political discontent, high unemployment, and rising food prices are causing social unrest in a number of countries, which is likely to dampen their short-term growth,” the fund said. “Spreading social unrest, rising sovereign risk premiums, and elevated commodity import prices will constrain growth prospects in several MENA economies.”
Almost four months after a 26-year-old vegetable seller set himself on fire in despair over Tunisia’s social, political and economic conditions, protesters in a half-dozen countries are trying to sweep away regimes that have ruled for decades. While Tunisia and Egypt are the only two nations to have toppled their leaders, Libya is embroiled in a civil conflict and unrest in Syria, Bahrain and Yemen has left hundreds dead and sent crude prices soaring 23 percent this year.
The IMF excluded Libya from its projections due to political uncertainty after almost two months of fighting between troops loyal to President Muammar Qaddafi and rebels in the North African country, holder of Africa’s largest oil reserves.
The region’s crude exporters have better economic prospects as prices rise and governments attempting to placate protesters spend more of their oil revenue, the IMF said, forecasting 5 percent growth among those nations. Qatar, holder of the world’s third-largest natural gas reserves, is forecast to grow by 20 percent this year and Saudi Arabia, with the world’s largest oil reserves, by 7.5 percent.
“Higher commodity prices and external demand are boosting production and exports in many economies in the region,” the IMF said. “Government spending programs are continuing to foster recovery in many oil-exporting economies.”
Saudi Arabia’s King Abdullah, seeking to prevent the regional unrest from spreading into his absolute monarchy, announced new spending plans on March 18 including $67 billion on housing.
Economic growth in Iran is expected to stall this year as subsidies for energy and other products are phased out, a measure that will yield benefits in the medium term, the IMF said. The plan will push Iranian consumer prices up 22.5 percent this year, giving it the highest inflation rate in a region where the average will be 10 percent, it said. The IMF forecasts inflation of 11.5 percent in Egypt and 6 percent in Syria.