Tourism rebound bolsters economies in southern and eastern Mediterranean, EBRD says

By Anthony Williams
@ebrdtony


Economic growth in the southern and eastern Mediterranean will continue to pick up speed this year, with most countries in the region enjoying their best tourism season since 2010, the European Bank for Reconstruction and Development (EBRD) said.

The EBRD’s latest Regional Economic Prospects report said the general upturn also reflected improved competitiveness in the wake of currency depreciations in Egypt and Tunisia, combined with the implementation of reforms.

However, forecasts for growth in Jordan and Lebanon have been revised down from earlier predictions in May, after the roll out of reforms in those two countries were held up because of social unrest and political instability.

In both Jordan and Lebanon, the projected growth in 2018 remains below the growth rate of the population, implying a decline in real per capita incomes, the report said.

The EBRD expects growth across the southern and eastern Mediterranean as a whole of 4.4 per cent in 2018, compared with 3.8 per cent in 2017. Expansion in 2019 is seen at 4.7 per cent, supported by recovery in traditional drivers of growth: higher exports; the implementation of business environment reforms to attract foreign direct investment; stronger private consumption from refugees; and greater domestic and regional political certainty.

In Egypt, the EBRD is forecasting economic growth of 5.5 per cent in the 2018-19 fiscal year compared with 5.3 per cent a year earlier. Growth is expected to be supported by a continued boost in confidence, a recovery in tourism, an increase in foreign direct investment and improved competitiveness. Oher positive factors are expected to include a strengthening of exports, the start of natural gas production from the Zohr field, the implementation of business environment reforms and prudent macroeconomic policies.

In Morocco, growth is expected to slow down in 2018 to 3.0 per cent, influenced by the negative base effect following favourable weather conditions for agriculture in 2017. In 2019, growth is forecast to rise to 3.5 per cent, supported by the continued recovery in tourist arrivals, an increase in foreign direct investment, greater competitiveness from the move to a more flexible exchange rate regime, a rebound in services and manufacturing, stronger export growth and expanded mining capacity.

The sustained growth is predicated on continuing the implementation of reforms to improve the business environment and boost productivity, and diversifying the economy away from agriculture.   

In Tunisia, growth is expected to pick up in 2019 to 3.0 per cent, after 2.8 per cent in 2018 and 1.9 per cent in 2017, supported by a continued recovery in tourism and investment, stronger growth in major export markets in Europe, and the implementation of structural reforms in the run up to the elections in November 2019.

In Jordan, growth is expected to rise only modestly to 2.2 per cent in 2018 and 2.4 per cent in 2019, after 2.0 per cent last year, supported by stronger private consumption from the rising refugee population, foreign investment, and greater certainty and confidence stemming from fiscal consolidation. Moreover, exports will benefit from higher mining output, higher phosphate prices, and the re-opening of the border with Syria and Iraq.  

The EBRD report said tourism arrivals in Jordan had increased by 7.8 per cent in 2017, the first increase since 2010, signalling the best tourism season since the Arab uprising. The rise has continued into 2018, with a year-on-year increase in tourism receipts of 14.9 per cent in the first half of 2018.

Growth this year in Lebanon has been negatively affected by a slowdown in the real estate sector, a major driver of growth, following the phasing out of subsidised lending. Delays in the formation of a government after the May 2018 elections also contributed to an expected slowdown in economic growth to 1.1 per cent in 2018, from 1.5 per cent last year.

Growth is expected to pick up to a range between 1.5 and 1.9 per cent in 2019 depending on the pace of recovery in the Lebanese construction and financial sectors, and the extent of reconstruction in Syria.

Read the report