World Bank Report: MENA Region's Economic Growth to Rebound
Despite Challenges, Growth Expected to Reach 3.4% in 2025 and 4.1% in 2026
According to the World Bank's Global Economic Reports, the Middle East and North Africa (MENA) region's economic growth is expected to rebound, increasing from 1.8% in 2024 to 3.4% in 2025, and further to 4.1% in 2026. However, the outlook for this year has deteriorated since June last year, primarily due to prolonged reductions in oil production by major producers in the region.
Among the key risks weighing on this recovery are the intensification of armed conflicts, uncertainty surrounding economic policies, and potential external shocks.
Tunisia's Economic Growth Slows Down
In Tunisia, economic growth was lower than expected in 2024, reaching only 1.2%, due to persistent drought conditions and limited domestic demand. However, a gradual improvement is expected, with a growth rate forecasted at 2.2% in 2025 and 2.3% in 2026. This recovery would be supported by more favorable external financing conditions and increased demand from Europe.
Climate Change and Water Scarcity Pose Significant Risks
The MENA region remains particularly vulnerable to extreme climate events, including heatwaves, droughts, and floods, which can cause significant damage to infrastructure and harm agricultural productivity. In Tunisia and Morocco, water scarcity is a major concern, and the persistence of dry conditions could further exacerbate the water situation.
Fiscal Policies to Have Neutral Impact on Growth
Fiscal policies in the region are expected to have a neutral impact on growth in 2025, with fiscal deficits remaining broadly stable, although disparities persist between oil-exporting and oil-importing countries.
Oil-Exporting Countries to See Reduced Budget Surpluses
In oil-exporting countries, budget surpluses in the Gulf Cooperation Council (GCC) countries are expected to decrease, offset by smaller deficits elsewhere. Despite the expected decline in oil revenues, fiscal policies are expected to stimulate activity, particularly in Kuwait. In Libya, a resumption of oil activity is expected to improve the budget situation, while in Iraq, a fiscal easing would support economic recovery, but at the expense of fiscal balance.
Oil-Importing Countries to Face Increased Fiscal Vulnerabilities
In contrast, budget deficits in oil-importing countries are expected to worsen in 2025, increasing financial vulnerabilities. In Egypt, interest payments will remain high, while budget consolidation efforts are planned in several economies, including Tunisia, Morocco, and Jordan from 2025, and Algeria from 2026.
