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EBRD cuts growth forecast for Arab countries

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Staff writer ▼ | May 14, 2016
The European Bank for Reconstruction and Development (EBRD) revised down its growth forecasts of four Arab Mediterranean economies in 2016.
Projection   A weaker economic performance is expected
A report made public by the bank brings weaker performances for Egypt, Jordan, Morocco and Tunisia in comparison to estimations done by the bank in October 2015.

In Egypt, the forecast is for an increase of 3.3% against the 4.2% of last year. The estimation from October 2015 pointed to a growth of 4.3% in 2016. According to information by Jordanian news agency Petra, a weaker economic performance is expected due to the decline of revenues with tourism and the Suez Canal, two of the country’s main sources of revenues.

In the case of tourism, according to Petra, there was a decline of 45% in the flow of tourists last year after the explosion of a Russian airplane in Sinai. In the case of the canal, the drop is attributed to the weak performance by global trade. For 2017, however, the bank is expecting Egyptian growth to reach 4.2%.

For Jordan, the EBRD expects a growth of 3% this year, against 2.4% in 2015. October’s forecast was 3.5%. Among the factors pushing down the forecast are the troubled regional scenario – Jordan shares borders with Syria and Iraq and receives a large number of refugees from the conflicts of both countries – and the declines in the construction and tourism sectors.

The regional scenario was also the factor pushing down Jordanian exports in 8% and foreign direct investments in 37%. Next year, the bank is forecasting a growth of 3.3% for Jordan based on expectations for the increase of domestic consumption rooted exactly in the demand from the growing number of refugees.

In the case of Morocco, the forecast was revised down from 3.8% in October 2015 to 2.3%. Last year, the country grew 4.5%. The reasons behind the fall are the weak economic performance of Europe, a decline of 1.4% in tourism and the modest growth seen by non-agricultural sectors.

The bank emphasizes, however, that the Moroccan strategy of making investments in high added value sectors, such as the auto and aerospace industry, has been turning positive results and compensating in part to the losses registered in more traditional sectors, such as tourism and the textile industry.

Foreign sales of the auto sector, for instance, increased 20.9% last year, well above the growth of Moroccan exports overall, which stood at 6.7%. The EBRD believes Morocco could grow 4% in 2017.

Tunisia should grow 1.6% in 2016, against only 0.8% last year. In October, the forecast was for 3% growth. The terrorist attacks suffered in 2015 affected tourism significantly, with other negative factors piling on, such as industrial disputes in the mining sector and cuts in external investments in the energy sector, besides fiscal vulnerabilities. For 2017, the forecast calls for 2.5% growth in Tunisia.