The World Bank sees Egypt’s growth slowing in the state’s 2023-2024 fiscal year. That comes as the region is growing a whole lot slower, it said in its latest MENA economic update (pdf). Here’s how it all breaks down:

EGYPT-

The World Bank has downgraded its Egypt growth forecast as rising borrowing costs and heightened inflation squeeze economic activity. The lender expects economic growth to slow to 3.7% in the current fiscal year from a projected 4.2% in FY 2022-2023, 0.3 percentage points lower than its previous forecast in June, according to its latest .

The rationale: A series of currency devaluations has triggered a run of record inflation, hitting private-sector business activity and consumer demand. Meanwhile, a rapid rise in borrowing costs is leaving businesses without access to cheap credit, constraining economic activity. The Central Bank of Egypt has more than doubled policy rates since March in an attempt to rein in inflation.

This is the second time the lender has cut its forecast this year: The Bank lowered its FY 2023-2024 growth forecast from 4.8% to 4% in June.

The Bank isn’t the only one to recently lower its growth expectations:

The World Bank sees our budget deficit widening to 7.1% of GDP this fiscal year from an expected 6.0% last year. The Finance Ministry is currently penciling in a 6.9% deficit this year. It sees the current account balance will remain in deficit at 2.8% of GDP this year.

FROM THE REGION-

Our neighbors are also in for a sharp slowdown: The World Bank expects regional growth to slump to 1.9% in 2023 from 6% last year, thanks to the ongoing voluntary cuts in oil output, the global high interest rate environment, and a rise in living costs. “ MENA continues to be on an unacceptably low growth path,” said Ferid Belhaj, the World Bank vice president for the MENA region, warning about the impact on youth unemployment.

Oil exporters are driving the slowdown: In reversal of a 2022 trend, growth in regional oil exporters is forecasted to decelerate to just 1.5% this year from 6.2% in 2022. The slowdown will be even more pronounced in the GCC, which will record 1% growth in 2023 compared to 7.3% last year.

Remember: GCC states saw their economies boom in 2022 on the back of surging oil and gas prices. This year, a combination of lower oil prices and oil supply cuts has caused economic growth to slow significantly.

KSA will be the hardest hit of the bunch: The Bank expects the Saudi economy to contract by 0.9% this year on the back of the deep voluntary oil production cuts, which it recently extended through to the end of the year in a bid to prop up global oil prices. Lower oil revenues will push government finances into the red, with the Bank forecasting a 1.5% / GDP budget deficit this year compared to 2022’s 2.6% surplus.

The slump should be short-lived: The Saudi economy is expected to return to growth in 2024, expanding at a 4.1% clip.

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