Regional Market Analysis: Economic Trends in the RBC Region First Half 2022 Update (Issue 11 – August 2022) – Syrian Arab Republic

  • Shortly after economies recovered slightly in 2021, the region was further challenged by conflict in Ukraine. According to the World Bank, average regional GDP growth fell from 2.8% in 2021 to 2.2% in 2022.

  • Crude oil prices have risen steadily in 2022, the spot price of Brent in Europe registered a monthly average of USD 123/barrel in June 2022, compared to USD 74 in June 2021. The increase in energy prices would benefit to net oil-exporting countries in the region such as Iraq, Iran, Algeria and Libya, only if oil production levels remained at least the same. In terms of oil production, oil exporting countries increased their production levels between 2021 and the first half of 2022, with the exception of Libya which experienced a 20% drop in its oil production levels between the H2 2021 and H1 2022.

  • The region, heavily dependent on food imports from the Black Sea, has been directly affected by the conflict which has led to trade and supply disruptions and spikes in global food and energy prices. Lebanon continues to record the highest annual food inflation rates (332%) in June 2022, not only in the region but among the top three countries in the world,
    Turkey recorded the second highest inflation rate in the region with an annual food inflation rate of almost 94% in June 2022.

  • A comparison of the cost of the food basket in the region is possible by converting the cost of the food basket from local currency units to USD. Throughout the first half of 2022, Armenia, Libya, Jordan and Turkey reported the highest food basket cost in US dollars.

  • Comparing the first half of 2022 to its corresponding period in 2021, we observe that the cost of the food basket in dollars has increased in most countries. This suggests that inflationary pressures have outweighed the effect of currency depreciation. In Turkey, the cost of the food basket in Turkish lira increased by 60%, but this did not compensate for the sharp depreciation of the currency which fell from 7.6 TRY to 14 TRY for one USD during the first four months from 2021 and 2022.

  • Affordability challenges, through soaring food and energy prices, are only one side of the coin. The physical availability of key commodities is a global concern given that Russia and Ukraine account for one-third of global wheat exports, 20% of corn exports and 80% of sunflower oil exports. The risks associated with the food availability of each country in the region depend on domestic production and stock levels, relative dependence on imports, particularly from the Black Sea, and the ability to find and finance commercial sources. alternatives. Armenia, Lebanon, Libya, Jordan and Yemen are at higher risk due to a relatively high dependency ratio on wheat imports and a high share of wheat imports from Russia and from Ukraine.

  • Inflationary pressures imported from soaring world food and energy prices and the continued devaluation of the Egyptian pound will negatively affect the purchasing power of households, especially the most vulnerable. In addition, the accumulation of public debt and the haemorrhaging of public finances could affect household income levels through subsidies rationing or reducing and/or revising public sector employment as wages and remuneration account for almost a fifth of total public expenditure, and/or higher tax rates. According to the World Bank’s April Economic Update, improving the efficiency of public spending and revenue mobilization will be crucial to taking advantage of fiscal space.

  • Securing funds from the Gulf and another loan from the IMF did not prevent further depreciation of the currency which first slipped from EGP 15.7 to the dollar to EGP 18.2 on March 21, only to depreciate further. at EGP 18.8 per dollar at the end of June. Yet, the injection of hard currency at this critical time could delay the severe repercussions of global and regional crises.

  • Government measures to boost local agricultural production as well as diversification of commercial supply sources could mitigate the fallout from the global food crisis. Reforms aimed at increasing private investment, exports and FDI remain crucial for the resilience and competitiveness of the economy. It is important to continue to pursue structural reforms to unlock the potential of the private sector in higher value-added and export-oriented activities, in order to create jobs and improve living standards.

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