Slow economic recovery in the SEMED region

By Nibal Zgheib

Economic recovery in the southern and eastern Mediterranean (SEMED) region has been slow due to a combination of domestic and external pressures such as stalled reforms and volatile security conditions in Egypt and the impact of regional tensions on Jordan, according to the EBRD’s latest economic report.

The four countries in the SEMED region where the EBRD invests are not expected to be affected particularly by events surrounding the Russia and Ukraine crisis.

However, any reduction in grain and wheat exports from Ukraine could push up costs for Egypt, a major importer.

The report noted that financial support from the Gulf countries has eased immediate financing concerns in Egypt, although underlying macroeconomic conditions are continuing to worsen. The fiscal deficit remains large and is still rising.

The Egyptian economy is expected to expand by 2.5 per cent in 2014 and by 3.0 per cent in 2015, after growth of 2.2 per cent last year.

Regional turmoil is continuing to affect Jordan’s economy and is putting a strain on the country's public services, weighing negatively on the country’s economic activities. Gross domestic product (GDP) is expected to gradually recover in the near term with a projected growth of 3.4 per cent in 2014 and 4.1 per cent in 2015.

Improvements in the eurozone should provide support for Morocco and Tunisia, which are closely linked to the economies in the southern part of the monetary zone.

Growth in Morocco accelerated markedly in 2013 to reach 4.3 per cent, reflecting a strong harvest and increased foreign direct investment (FDI).

The report sees expansion of 4.2 per cent in 2014 and 5.0 per cent in 2015 as the non-agricultural sector picks up in tandem with an expected recovery in the eurozone.

In Tunisia, large-scale protests, deteriorating security conditions and the political crisis had a negative impact on the economy in 2013, when there was growth of 2.7 per cent.

However, significant political progress in Tunisia is having a positive impact on the economic outlook and growth is expected to pick up to 3.4 per cent in 2014 and 4.7 per cent in 2015.

Read the full Regional Economic Prospects - May 2014 (944KB - PDF)