- The EBRD is forecasting growth to pick up to 3.4 per cent for the SEMED region in 2024
- Downward revisions from the previous forecasts reflect slower implementation of large public investment projects in Egypt and spillovers from the war in Gaza
- Average growth is projected to pick up slightly to 3.9 per cent in 2025
The European Bank for Reconstruction and Development (EBRD) is forecasting accelerated average growth of 3.4 per cent in gross domestic product (GDP) for 2024 in its southern and eastern Mediterranean (SEMED) region, according to the Bank’s latest Regional Economic Prospects report, published today.
Growth in the SEMED region is expected to accelerate from 2.7 per cent in 2023 to 3.4 per cent in 2024 and 3.9 per cent in 2025, as economic stabilisation programmes and reforms take effect. Nonetheless, this is a downward revision from the previous forecast for 2024, owing to slower-than-expected implementation of large public investment projects in Egypt and to spillovers from the war in Gaza.
Overall, the region has shown resilience in the face of the war in Gaza and rising regional political and security tensions over the past months, although Jordan has seen a drop in tourism and investment while Tunisia has continued to struggle with financing constraints.
The reduction in Egypt’s revenues from Suez Canal traffic was more than compensated for by recent commitments from international partners, including an expanded International Monetary Fund (IMF) programme. Support from the IMF and international donors has contributed to the macroeconomic stabilisation of Egypt, Jordan and Morocco. Inflation has moderated across the region, except in Egypt where it remains above 30 per cent, and the region is broadly on track for fiscal consolidation in 2024, while aiming to maintain growth-enhancing investment and targeted social protection.
The SEMED economies in detail
Egypt
Economic growth is expected to slow from 3.8 per cent in fiscal year 2023 (ending June 2023) to 3 per cent in fiscal year 2024 as foreign exchange shortages and reform uncertainty weigh on the economic outlook. On a calendar-year basis, growth is forecast at 3.9 per cent in 2024 and 4.4 per cent in 2025.
Economic activity has been supported by public spending as well as by the tourism, construction and services sectors.
The outlook for fiscal year 2025 is more favourable, with growth expected to pick up to 4 per cent, thanks to significant donor support and macroeconomic stabilisation under a revised IMF programme approved in March 2024.
The recent devaluation of the Egyptian pound could reinvigorate foreign and domestic investment, especially if accompanied by structural reform. Downside risks include high interest rates, persistently high inflation (expected to remain at 34 per cent in 2024), and an escalation of regional tensions that would endanger investor confidence, tourism and trade.
Jordan
Despite robust growth, spillovers from the prolonged war in Gaza are expected to lead to a deceleration in growth from 2.6 in 2023 to 2.4 per cent in 2024, reflecting lower tourist arrivals, suppressed investment inflows and the postponement of consumer expenditure at a time of uncertainty. A slight pickup in economic growth to 2.6 per cent is forecast in 2025, provided geopolitical conditions improve.
Unemployment remained high at an average of 21.4 per cent in the last quarter of 2023, and was higher among women (29.8 per cent) and youth (42.4 per cent). Meanwhile, inflation picked up slightly towards the end of the year, reflecting a rise in the prices of some food staples and a planned increase in water tariffs, before easing to 1.6 per cent in March 2024.
The central bank of Jordan continued to mirror the decisions of the US Federal Reserve, holding the policy interest rate stable since July 2023 after a series of hikes.
Lebanon
GDP is expected to grow by 0.2 per cent in 2024, held back by geopolitical risk, political inaction and stalled reform. Growth could accelerate to 3 per cent in 2025, if regional tensions subside, an IMF programme is in place and there is progress in the implementation of reforms.
Foreign exchange reserves, while still at a record low, edged up in 2023 on the back of increased remittances and tourist arrivals. In an attempt to unify the multiple exchange rates, Lebanon’s central bank introduced several measures, including phasing out the Sayrafa exchange-rate platform, while the 2024 general budget law set the exchange rate closer to the black-market rate. Against this backdrop, the market rate has stabilised at around 89,700 pounds per US dollar since the end of August, and inflation dropped to 123 per cent in February 2024 from a peak of 352 per cent in March 2023, supported by easing energy and food prices.
Morocco
The economy proved resilient in the face of the 6.8-magnitude earthquake that caused widespread destruction around the High Atlas Mountains near Marrakech in September 2023. Unemployment edged up to 13.0 per cent by the end of 2023, while inflation eased to 0.3 per cent by February 2024. Growth is projected to remain largely stable at 3 per cent in 2024 and to pick up to 3.6 per cent in 2025, supported by a recovery in external demand and government investment.
Despite additional expenditure related to post-earthquake reconstruction and an expansion of targeted spending on social protection, the government is pursuing a path of gradual fiscal consolidation, while leveraging the mobilisation of domestic resources. In the medium term, Morocco’s dependence on energy imports and seasonal agricultural production makes the economy vulnerable to climate risks.
Tunisia
Economic growth in Tunisia is expected to recover strongly from 0.4 per cent in 2023 to around 1.9 per cent in 2024 and 2 per cent in 2025, supported by reform efforts and continued fiscal consolidation, while macroeconomic risks have been contained somewhat.
The Tunisian economy slowed from 2.6 per cent in 2022 to 0.4 per cent in 2023, on account of a drought that affected the agricultural sector and a drop in phosphate sales. These factors were only partially offset by expansion in the tourism, financial services and industrial sectors.
Against this backdrop, unemployment rose to 16.4 per cent in the last quarter of 2023 and inflation stood at 7.5 per cent in February 2024.
Overall, government finances remain constrained, and access to external financing is still very limited. Nonetheless, Tunisia repaid all outstanding external debt on time and continues to progress – albeit slowly – on key reforms, including gradual fiscal consolidation by containing the public-sector wage bill and reforming certain subsidies.
The EBRD is a multilateral bank that promotes the development of the private sector and entrepreneurial initiative in 36 economies across three continents. The Bank is owned by 73 countries as well as the EU and the EIB. EBRD investments are aimed at making the economies in its regions competitive, inclusive, well governed, green, resilient andintegrated. Follow us on the web, Facebook, LinkedIn, Instagram, Twitter and YouTube.