• EBRD forecasts up to 1.5 per cent economic growth in Jordan.

• Inflation rate reached 1.9 per cent year-on-year in September.

• Growth to pick up to 2.2 percent in 2022.

The Jordanian economic growth is expected to reach 1.5 per cent in 2021 as restrictions of movements are gradually lifted towards the end of the year according to the latest Regional Economic Prospects report, published today by the European Bank for Reconstruction and Development (EBRD).

Sustained by stronger cross-border trade and a continued recovery in the tourism sector, growth is expected to pick up to 2.2 per cent in 2022.

Finance and business-related services as well as manufacturing and mining were the main drivers of growth in 2021, while tourism continued to weigh negatively on growth.

Inflation volatility subsided as prices resumed their gradual acceleration, with the inflation rate reaching 1.9 per cent year-on-year in September.

The EBRD raised the economic growth in the southern and eastern Mediterranean (SEMED) region to 4.2 percent in 2021.

The recovery in economic activity has started in most countries of the SEMED region, the reports says, and is mainly driven by a rebound of agriculture and telecommunication as well as limited growth in tourism and exports.

The future economic rebound will depend on the strength of the global recovery, progress of the vaccination rollout, political developments and the implementation of business environment reforms. The EBRD report names increasing competition, improving governance, combating corruption, advancing digitalisation and promoting inclusion as key steps to attract investors.

For 2022, output in the SEMED region is expected to grow by 4.4 per cent, reflecting a strong pick-up in economic activity, notably in Egypt and Morocco.

The SEMED economies in detail

In Egypt, growth slowed from 3.6 per cent to 3.3 per cent in the fiscal year ending June 2021, on the back of sluggish manufacturing activity and weak tourism which offset the economic activities of the wholesale and retail trade, construction, agriculture and telecommunications sectors.

Meanwhile, inflation slowed to 4.5 per cent in the same fiscal year, below the central bank’s target, and began to increase in the period July to September 2021, averaging 5.9 per cent year on year, driven by increases in the prices of food and beverages.

Growth is expected to pick up to 4.9 per cent in the fiscal year 2021-22, sustained by a boom in the telecommunications sector as well as a pickup in private consumption and investment and the return of foreign direct investment.

However, risks include a slow uptake of Covid-19 vaccination and a weak outlook for the tourism sector in view of a likely delay in the global recovery of tourism.

Lebanon continues to experience its most serious crisis in decades, following a painful economic contraction of 25 per cent in 2020. Delays in the formation of a government have derailed much-needed reforms, pushing back prospects for an International Monetary Fund-supported programme.

A further contraction of 10 per cent is expected in 2021. However, newly resumed negotiations with the IMF have raised hopes for an incoming reform programme in 2022, but agreement and disbursement are expected to face delays. In light of this uncertainty, any recovery is expected to remain modest in the short term, not exceeding GDP growth of 3 per cent in 2022.

Morocco’s economy is expected to recover by 5 per cent in 2021, before moderating to growth of 3.2 per cent in 2022. This reflects the relative success of Morocco’s vaccination campaign and therefore a relatively faster reopening of the economy, despite a cautious resumption in tourism globally.

The economy will benefit from a good rainy season and the expected recovery in Europe, Morocco’s main trading partner, as well as the strengthening of exports from the phosphate and automotive sectors.

In Tunisia, economic growth continued to contract in the first quarter of 2021, by 1.7 per cent year on year, but is projected to recover modestly by just 2.5 per cent for 2021 before picking up to 3.3 per cent in 2022.

This reflects the recovery in the export-driven manufacturing sector. However, the tourism and transport sectors continued to be affected by Covid-19 restrictions and agriculture contracted after a record year in 2020.

Inflation has fallen but remained relatively high at 5.5 per cent year on year in the first three quarters of 2021, driven by food price growth and a reduction in subsidies.

Economic recovery will depend on the pace at which reforms are implemented. These have been held back by a lack of political consensus and by the limited scope of ambition to overhaul public administration and state-owned enterprises.