Growth Slows for Most MENA Economies Amid Double-Digit Food Inflation

Economies in the Middle East and North Africa (MENA) are expected to grow at a slower pace in 2023, as double-digit food inflation adds pressure on poorer households and the impact of food insecurity can span generations, according to the World Bank’s latest economic update.

Titled “Altered Destinies: The Long-Term Effects of Rising Prices and Food Insecurity in the Middle East and North Africa,” the report forecasts MENA’s GDP will slow to 3.0% in 2023, from 5.8% in 2022. Oil exporters, who benefited from a windfall in 2022, will experience slower growth, but a large gap remains between high-income countries and the rest of the region. Real GDP per capita growth, a better proxy for living standards, is expected to slow down to 1.6% in 2023 from 4.4% in 2022.

Inflation in the region rose dramatically in 2022, especially in countries that experienced currency depreciations. The report focused specifically on the impact of food price inflation on food insecurity, finding that eight out of 16 countries suffered from double-digit food price inflation or higher, affecting poorer households the most as they spend more of their budgets on food than those that are better off.

“Food price inflation is having a devastating impact on poor families. The long-term implications of food insecurity will be felt for generations and sadly limit prospects for many, many young people,” said Ferid Belhaj, World Bank Vice President for the MENA region. “The human and economic cost of inaction is immense and bold policies are needed in a region where young people make up more than half of the population,” he added.

The twice-yearly report found that average year-on-year food inflation across 16 MENA economies between March and December 2022 was 29%. This was higher than headline inflation, which rose on average to 19.4% year-on-year during that period, compared to 14.8% between October 2021 and February 2022, the month of Russia’s invasion of Ukraine. Across all four MENA subgroups covered in the report — developing oil importers, developing oil exporters, conflict countries and the GCC — inflation accounts for 24% to 33% of 2023’s forecasted food insecurity.

“The report estimates that close to one out of five people living in developing countries in MENA is likely to be food insecure this year and that almost 8 million children under 5 years of age are among those who will be hungry. Food price inflation, even if it is temporary, can cause long-term and often irreversible damage,” said Roberta Gatti, World Bank Chief Economist for the MENA region.

According to the report, the increase in food prices from March-June 2022, may have increased the risk of childhood stunting by 17%-24% in developing countries in MENA, which translates to about 200,000 to 285,000 newborns who are at risk of stunting. More generally, research shows that child malnutrition leads to poor performance in school, lower incomes and poorer health.

“The research offers clear evidence that inadequate nutrition in utero and early childhood has the potential to disrupt the destinies of children, setting them on paths to limited prosperity,” added Gatti.

Projected financing needs to address severe food insecurity run into billions of dollars annually, but the report makes clear that money alone is not enough. The report suggests policy tools that could help to alleviate food insecurity before it escalates into a full-blown crisis, including targeted cash and in-kind transfers that could be introduced immediately to stem acute food insecurity. Mothers, who play a vital role both in utero and in early childhood, would benefit from improved parental leave, childcare, and medical care, which are important for a child’s development.

Improved and more current data on the state of childhood health and nutrition are needed along with better access to administrative information that would help target priorities and reach vulnerable populations more easily. Making food systems more resilient and strengthening supply chains, especially in the face of climate and future market shocks, is essential, the report concluded.