## 2. Monetary Policy: Where Does the Middle East and Central Asia Stand?

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---

### 2.1 Introduction and key challenge
- Restoring price stability remains a key policy challenge for ME&CA countries after the 2021–22 surge in inflation driven by demand and supply factors, including a rise in food prices and disruptions to global supply chains.  
- Inflation may have peaked in several countries, but:
  - food and energy prices remain high relative to their pre-pandemic levels;
  - inflation is above target in most countries that have a target; and
  - core inflation remains stubbornly elevated.
- Appropriate next steps for central banks depend on: how nominal rate increases translated into real rates; the level of the natural rate of interest; monetary policy transmission lags; broader financial conditions (including longer-term interest rates and net capital inflows); and coordination with fiscal policy.

### 2.2 Monetary policy instruments and recent actions
- Main instruments and usage:
  - Two-thirds of ME&CA central banks use a policy rate to signal their stance.
  - Nearly three-quarters of central banks use reserve requirements on domestic currency liabilities.
  - Slightly more than half use reserve requirements on foreign currency liabilities.
- Recent actions since January 2021 and through 2021–22:
  - Most central banks raised policy rates, although by varying degrees.
  - Most central banks kept reserve requirement rates unchanged relative to their averages in the first half of 2021; however, seven raised reserve requirement rates on domestic currency liabilities and four on foreign currency liabilities (in most instances reflecting unwinding of COVID-19–related measures).
  - Most central banks acted to mop up excess liquidity via issuing central bank securities, selling government securities, reverse repurchase agreements, and selling foreign currency in FX markets.
  - Limited use of macroprudential tools; about half of central bank actions were related to unwinding pandemic-related measures.
  - Communication: almost two-thirds publish a communiqué after a monetary policy decision; only a few provide forward guidance on interest rates.
- Institutional constraints:
  - Lack of coordination between monetary and fiscal policies, and fiscal dominance, hamper monetary policy effectiveness.
  - Fiscal dominance is present in about half of ME&CA countries, and its incidence increased in several countries over the past two years reflecting the pandemic, Russia’s war in Ukraine, and tighter external financing.

### 2.3 Assessing the monetary policy stance
- Benchmarks and methods used:
  - Two measures of natural rates defined:
    - Short-term (natural policy rate) = real natural rate + one-year-ahead inflation expectations (WEO).
    - Long-term (terminal rate) = real natural rate + five-year-ahead inflation expectations (WEO).
  - Natural rates estimated using: (1) a small semistructural open economy model jointly estimating natural rates, potential output, and equilibrium exchange rate; and (2) a time-varying parameter vector autoregression (TVP-VAR).
- Main findings on stance:
  - Point estimates of natural policy rates suggest the monetary policy stance was appropriately tight or neutral in many countries in early 2023.
  - Monetary policy remains loose (policy interest rate below natural policy rates) and may need further tightening in some countries: Egypt, Pakistan, Tunisia.
  - Once short-term inflation pressures are contained, policy interest rates—currently well above estimates of terminal rates—will eventually converge to lower levels.

### 2.4 How recent tightening compares with peers and past responses
- Benchmarking approach: two monetary policy reaction benchmarks: (1) ME&CA countries’ historical reaction over the last two decades (country-specific rule), and (2) an EMDE benchmark based on the five largest Latin American inflation-targeters (Brazil, Chile, Colombia, Mexico, Peru).
- Findings:
  - Countries with an inflation-targeting framework (all in the Caucasus and Central Asia) and conventional peggers show positive monetary rule residuals since 2021, indicating policy rates rose more than in previous shocks of comparable magnitude.
  - In inflation-targeting countries in the Caucasus and Central Asia, the rise in policy interest rates was also consistent with the EMDE benchmark, reflecting a steadfast commitment to fighting inflation and improvements in monetary policy frameworks.
  - Egypt and Tunisia increased interest rates consistent with their historical norms and less than the EMDE benchmark, suggesting less reactivity to inflation than peers, likely because trade-offs with debt sustainability are critical.

### 2.5 Financial conditions and transmission
- Financial Conditions Index (FCI):
  - A monthly nominal FCI was estimated for 14 ME&CA countries using indicators across money, debt, and equity markets and external factors.
- Evolution and effects:
  - Financial conditions have tightened across ME&CA since the end of 2021, with significant heterogeneity across countries, driven mainly by a sharp rise in overall interest rates and changing global factors.
  - The FCI co-moves positively with policy interest rates.
  - The relationship between increases in policy interest rates and tighter financial conditions is positive but dispersed across the region, reflecting heterogeneous use of instruments and heterogeneity in monetary transmission (magnitude and timing of interest rate pass-through).

### Monetary policy transmission — key findings
- Monetary policy tightening reduces inflation and output, with heterogeneity across exchange rate regimes.
- Peak effects on quarterly inflation occur between one and three quarters after a monetary shock; inflation reaches half of the peak impact about four to 11 quarters after the shock (for year-over-year inflation, these lags are about four to six quarters and six to 13 quarters, respectively).
- Following a surprise monetary policy tightening, a large appreciation of the nominal exchange rate was observed for all countries in the sample, occurring within the same quarter as the tightening.
- For countries with a floating or managed exchange rate, a 100 basis point monetary policy shock leads to an appreciation in the nominal exchange rate of almost 2 percent on an annualized basis.
- In a structural vector autoregression framework, on average 40 percent of the peak impact on inflation from monetary policy shocks is driven by the exchange rate.
- Local projection estimates (Jordà 2005) indicate that in countries with flexible or managed exchange rate regimes, inflation declines by a larger magnitude when the exchange rate also appreciates following a contractionary monetary policy shock; transmission lags are shorter when the exchange rate amplifies the shock.

### Bank-lending channel — empirical results
- For countries with fixed exchange rates (peggers), at the peak a 100 basis point US monetary tightening leads to:
  - 81 basis points higher asset rates (proxy for effective lending rates)
  - 66 basis points higher liability rates (proxy for effective deposit rates)
  - a reduction of 3.2 percent in real credit growth
- Pass-through operates with sizable lags: in the year following a 100 basis point tightening, asset and liability rates rise by approximately 30 basis points on average; peak responses are reached after eight to 10 quarters.
- Oil price amplifies/dampens transmission for oil-exporting peggers:
  - The pass-through of a 100 basis point US interest rate rise into domestic asset and liability rates is more than 20 basis points stronger at an oil price of $65 per barrel compared with an $82 oil price.
  - Higher oil prices attenuate the pass-through into real credit growth.
- For managed peggers and floaters, pass-through of a 100 basis point rise in the policy interest rate:
  - Floaters: asset and liability rate pass-through peaks at 60 and 34 basis points, respectively.
  - Managed peggers: asset and liability rate pass-through peaks at 28 and 22 basis points, respectively.
  - The response of credit growth is economically small and statistically insignificant for all countries except for Pakistan.
- Pass-through tends to be stronger in countries with a smaller footprint of state-owned banks; banking sector characteristics (including dominance of state-owned banks) appear to limit the lending channel in several countries.

### Aggregate assessment and dynamics
- Interest rate increases since 2020 have acted to reduce inflation for all countries examined, with larger inflation reductions among countries with greater exchange rate flexibility (Armenia, Georgia, Kazakhstan, Pakistan).
- Inflation has continued to rise in Egypt, Pakistan, and Tunisia; comparisons of current policy interest rates relative to natural policy rate estimates suggest further interest rate increases are needed in these cases to stabilize inflation.
- The high level of policy interest rates relative to terminal rates at end-2022 is expected to continue putting downward pressure on inflation throughout 2023; short-term adjustments will depend on the evolution of inflation and inflation expectations, and on past policy changes and domestic and global conditions.

### Policy recommendations
- Exercise close vigilance and calibrate and communicate monetary policy in a data-dependent manner to prevent inflation expectations from becoming de-anchored.
- If the policy stance is tight or neutral and inflation appears to have peaked (for example, Armenia and Georgia), remain data dependent and avoid loosening until clear signs show core inflation on a downward trajectory.
- Countries with a currency peg should continue following US monetary policy and consider additional macroprudential policies (for example, lower loan-to-value and debt-to-income ratios) if asset price appreciation is significant or financial conditions remain loose or loosen.
- Where the policy stance is loose and inflationary pressures persist (for example, in Egypt, Pakistan, and Tunisia), consider tighter monetary policy to stabilize inflation and inflation expectations.
- Where there is lack of coordination between monetary and fiscal policy or fiscal dominance, address fiscal imbalances so monetary policy can be effective; until then, monetary policy may need to be tightened more than if fiscal policy were coordinated.
- Where high oil prices dampen the bank-lending channel (energy exporters), complement the policy rate with other monetary or macroprudential tools.
- Central banks tightening policy should be mindful of financial stability risks and closely monitor financial system vulnerabilities arising from increasing interest rates.
- Improve monetary policy frameworks and transmission:
  - Develop surveys of inflation expectations where data are not available.
  - Strengthen the lending channel by developing the financial sector: promote well-functioning and highly liquid interbank markets for reserves and secondary markets for government securities with a broad range of maturities, and promote measures to de-dollarize financial systems with a high degree of dollarization.
  - Facilitate greater exchange rate flexibility to allow the exchange rate to act as a shock absorber and improve the efficiency of monetary policy.
  - Coordinate monetary policy with financial and fiscal policies; ensure state-owned commercial banks operate on a level playing field with private banks and phase out quasi-fiscal activities and subsidized lending by state-owned banks.
  - Use macroprudential measures in countries with fixed exchange rate regimes to strengthen the link between policy rate changes and financial conditions—particularly important for Caucasus and Central Asia countries experiencing large capital inflows and for Gulf Cooperation Council countries experiencing rapid asset price appreciation (for example, in equity or housing markets).
  - Enhance central bank communications and increase transparency of monetary operations and foreign exchange interventions.

### ME&CA: Selected Economic Indicators, 2000–24 (selected lines as reported)
- Real GDP (annual growth): 4.5–2.7; 4.6; 5.3; 2.9; 3.5
- of which non-oil growth: 5.3–2.7; 5.3; 4.5; 3.2; 3.7
- Current Account Balance: 5.8–3.0; 3.3; 7.; 5.3; 2.1
- Overall Fiscal Balance: 1.4–7.9; –2.5; 1.4; –1.5; –2.2
- Inflation (year average; percent): 7.; 2 10.4; 12.8; 14.; 15.9; 12.0

*International Monetary Fund. Regional Economic Outlook — Middle East and Central Asia, Chapter 2 (May 2023).*

### 2. Monetary Policy: Where Does the

### 2. Monetary Policy: Where Does the Middle East and Central Asia Stand?

### 2.1 Introduction and key challenge
- Restoring price stability remains a key policy challenge for ME&CA countries after the 2021–22 surge in inflation driven by demand and supply factors, including a rise in food prices and disruptions to global supply chains.  
- Inflation may have peaked in several countries, but:  
  - food and energy prices remain high relative to their pre-pandemic levels;  
  - inflation is above target in most countries that have a target; and  
  - core inflation remains stubbornly elevated.  
- Appropriate next steps for central banks depend on: how nominal rate increases translated into real rates; the level of the natural rate of interest; monetary policy transmission lags; broader financial conditions (including longer-term interest rates and net capital inflows); and coordination with fiscal policy.

### 2.2 Monetary policy instruments and recent actions
- Main instruments and usage:  
  - Two-thirds of ME&CA central banks use a policy rate to signal their stance.  
  - Nearly three-quarters of central banks use reserve requirements on domestic currency liabilities.  
  - Slightly more than half use reserve requirements on foreign currency liabilities.  
- Recent actions since January 2021 and through 2021–22:  
  - Most central banks raised policy rates, although by varying degrees.  
  - Most central banks kept reserve requirement rates unchanged relative to their averages in the first half of 2021; however, seven raised reserve requirement rates on domestic currency liabilities and four on foreign currency liabilities (in most instances reflecting unwinding of COVID-19–related measures).  
  - Most central banks acted to mop up excess liquidity via issuing central bank securities, selling government securities, reverse repurchase agreements, and selling foreign currency in FX markets.  
  - Limited use of macroprudential tools; about half of central bank actions were related to unwinding pandemic-related measures.  
  - Communication: almost two-thirds publish a communiqué after a monetary policy decision; only a few provide forward guidance on interest rates.
- Institutional constraints:  
  - Lack of coordination between monetary and fiscal policies, and fiscal dominance, hamper monetary policy effectiveness.  
  - Fiscal dominance is present in about half of ME&CA countries, and its incidence increased in several countries over the past two years reflecting the pandemic, Russia’s war in Ukraine, and tighter external financing.

### 2.3 Assessing the monetary policy stance
- Benchmarks and methods used:  
  - Two measures of natural rates defined:  
    - Short-term (natural policy rate) = real natural rate + one-year-ahead inflation expectations (WEO).  
    - Long-term (terminal rate) = real natural rate + five-year-ahead inflation expectations (WEO).  
  - Natural rates estimated using: (1) a small semistructural open economy model jointly estimating natural rates, potential output, and equilibrium exchange rate; and (2) a time-varying parameter vector autoregression (TVP-VAR).  
- Main findings on stance:  
  - Point estimates of natural policy rates suggest the monetary policy stance was appropriately tight or neutral in many countries in early 2023.  
  - Monetary policy remains loose (policy interest rate below natural policy rates) and may need further tightening in some countries: Egypt, Pakistan, Tunisia.  
  - Once short-term inflation pressures are contained, policy interest rates—currently well above estimates of terminal rates—will eventually converge to lower levels.

### 2.4 How recent tightening compares with peers and past responses
- Benchmarking approach: two monetary policy reaction benchmarks: (1) ME&CA countries’ historical reaction over the last two decades (country-specific rule), and (2) an EMDE benchmark based on the five largest Latin American inflation-targeters (Brazil, Chile, Colombia, Mexico, Peru).  
- Findings:  
  - Countries with an inflation-targeting framework (all in the Caucasus and Central Asia) and conventional peggers show positive monetary rule residuals since 2021, indicating policy rates rose more than in previous shocks of comparable magnitude.  
  - In inflation-targeting countries in the Caucasus and Central Asia, the rise in policy interest rates was also consistent with the EMDE benchmark, reflecting a steadfast commitment to fighting inflation and improvements in monetary policy frameworks.  
  - Egypt and Tunisia increased interest rates consistent with their historical norms and less than the EMDE benchmark, suggesting less reactivity to inflation than peers, likely because trade-offs with debt sustainability are critical.

### 2.5 Financial conditions and transmission
- Financial Conditions Index (FCI):  
  - A monthly nominal FCI was estimated for 14 ME&CA countries using indicators across money, debt, and equity markets and external factors.  
- Evolution and effects:  
  - Financial conditions have tightened across ME&CA since the end of 2021, with significant heterogeneity across countries, driven mainly by a sharp rise in overall interest rates and changing global factors.  
  - The FCI co-moves positively with policy interest rates.  
  - The relationship between increases in policy interest rates and tighter financial conditions is positive but dispersed across the region, reflecting heterogeneous use of instruments and heterogeneity in monetary transmission (magnitude and timing of interest rate pass-through).

### 2.6 Monetary policy transmission and policy implications
- Stylized features of transmission in ME&CA:  
  - Transmission is stronger in countries with floating or managed exchange rate regimes than in those with a peg, operating mainly through the exchange rate channel.  
  - The credit channel is relatively weak in the region.  
  - In countries where state-owned banks play an important role in financial intermediation, quasi-monetary and quasi-fiscal activities weaken transmission.
- Policy implications and recommendations:  
  - Even countries that have responded appropriately would benefit from strengthening monetary policy frameworks and fostering financial development.  
  - Activating additional transmission channels would enhance central bankers’ ability to fight inflation while reducing economic costs.  
  - Greater exchange rate flexibility could help strengthen monetary policy effectiveness.  
  - Use of macroprudential policies could help complement monetary policy.  
  - Policymakers should reduce quasi-monetary and quasi-fiscal activities of state-owned banks to improve transmission.

_International Monetary Fund. Regional Economic Outlook — Middle East and Central Asia, Chapter 2 (May 2023)._

### 2. Monetary Policy: Where Does the Middle East and Central Asia Stand?

### 2. Monetary Policy: Where Does the Middle East and Central Asia Stand?

### Monetary policy transmission — key findings
- Monetary policy tightening reduces inflation and output, with heterogeneity across exchange rate regimes.
- Peak effects on quarterly inflation occur between one and three quarters after a monetary shock; inflation reaches half of the peak impact about four to 11 quarters after the shock (for year-over-year inflation, these lags are about four to six quarters and six to 13 quarters, respectively).
- Following a surprise monetary policy tightening, a large appreciation of the nominal exchange rate was observed for all countries in the sample, occurring within the same quarter as the tightening.
- For countries with a floating or managed exchange rate, a 100 basis point monetary policy shock leads to an appreciation in the nominal exchange rate of almost 2 percent on an annualized basis.
- In a structural vector autoregression framework, on average 40 percent of the peak impact on inflation from monetary policy shocks is driven by the exchange rate.
- Local projection estimates (Jordà 2005) indicate that in countries with flexible or managed exchange rate regimes, inflation declines by a larger magnitude when the exchange rate also appreciates following a contractionary monetary policy shock; transmission lags are shorter when the exchange rate amplifies the shock.

### Bank-lending channel — empirical results
- For countries with fixed exchange rates (peggers), at the peak a 100 basis point US monetary tightening leads to:
  - 81 basis points higher asset rates (proxy for effective lending rates)
  - 66 basis points higher liability rates (proxy for effective deposit rates)
  - a reduction of 3.2 percent in real credit growth
- Pass-through operates with sizable lags: in the year following a 100 basis point tightening, asset and liability rates rise by approximately 30 basis points on average; peak responses are reached after eight to 10 quarters.
- Oil price amplifies/dampens transmission for oil-exporting peggers:
  - The pass-through of a 100 basis point US interest rate rise into domestic asset and liability rates is more than 20 basis points stronger at an oil price of $65 per barrel compared with an $82 oil price.
  - Higher oil prices attenuate the pass-through into real credit growth.
- For managed peggers and floaters, pass-through of a 100 basis point rise in the policy interest rate:
  - Floaters: asset and liability rate pass-through peaks at 60 and 34 basis points, respectively.
  - Managed peggers: asset and liability rate pass-through peaks at 28 and 22 basis points, respectively.
  - The response of credit growth is economically small and statistically insignificant for all countries except for Pakistan.
- Pass-through tends to be stronger in countries with a smaller footprint of state-owned banks; banking sector characteristics (including dominance of state-owned banks) appear to limit the lending channel in several countries.

### Aggregate assessment and dynamics
- Interest rate increases since 2020 have acted to reduce inflation for all countries examined, with larger inflation reductions among countries with greater exchange rate flexibility (Armenia, Georgia, Kazakhstan, Pakistan).
- Inflation has continued to rise in Egypt, Pakistan, and Tunisia; comparisons of current policy interest rates relative to natural policy rate estimates suggest further interest rate increases are needed in these cases to stabilize inflation.
- The high level of policy interest rates relative to terminal rates at end-2022 is expected to continue putting downward pressure on inflation throughout 2023; short-term adjustments will depend on the evolution of inflation and inflation expectations, and on past policy changes and domestic and global conditions.

### Policy recommendations
- Exercise close vigilance and calibrate and communicate monetary policy in a data-dependent manner to prevent inflation expectations from becoming de-anchored.
- If the policy stance is tight or neutral and inflation appears to have peaked (for example, Armenia and Georgia), remain data dependent and avoid loosening until clear signs show core inflation on a downward trajectory.
- Countries with a currency peg should continue following US monetary policy and consider additional macroprudential policies (for example, lower loan-to-value and debt-to-income ratios) if asset price appreciation is significant or financial conditions remain loose or loosen.
- Where the policy stance is loose and inflationary pressures persist (for example, in Egypt, Pakistan, and Tunisia), consider tighter monetary policy to stabilize inflation and inflation expectations.
- Where there is lack of coordination between monetary and fiscal policy or fiscal dominance, address fiscal imbalances so monetary policy can be effective; until then, monetary policy may need to be tightened more than if fiscal policy were coordinated.
- Where high oil prices dampen the bank-lending channel (energy exporters), complement the policy rate with other monetary or macroprudential tools.
- Central banks tightening policy should be mindful of financial stability risks and closely monitor financial system vulnerabilities arising from increasing interest rates.
- Improve monetary policy frameworks and transmission:
  - Develop surveys of inflation expectations where data are not available.
  - Strengthen the lending channel by developing the financial sector: promote well-functioning and highly liquid interbank markets for reserves and secondary markets for government securities with a broad range of maturities, and promote measures to de-dollarize financial systems with a high degree of dollarization.
  - Facilitate greater exchange rate flexibility to allow the exchange rate to act as a shock absorber and improve the efficiency of monetary policy.
  - Coordinate monetary policy with financial and fiscal policies; ensure state-owned commercial banks operate on a level playing field with private banks and phase out quasi-fiscal activities and subsidized lending by state-owned banks.
  - Use macroprudential measures in countries with fixed exchange rate regimes to strengthen the link between policy rate changes and financial conditions—particularly important for Caucasus and Central Asia countries experiencing large capital inflows and for Gulf Cooperation Council countries experiencing rapid asset price appreciation (for example, in equity or housing markets).
  - Enhance central bank communications and increase transparency of monetary operations and foreign exchange interventions.

*Source: Chapter 2, "Monetary Policy: Where Does the Middle East and Central Asia Stand?", May 2023, INTERNATIONAL MONETARY FUND.*

### 2. Monetary Policy: Where Does the Middle East and Central Asia Stand?

### 2. Monetary Policy: Where Does the Middle East and Central Asia Stand?

### ME&CA: Selected Economic Indicators, 2000–24
- Real GDP (annual growth): 4.5–2.7; 4.6; 5.3; 2.9; 3.5
- of which non-oil growth: 5.3–2.7; 5.3; 4.5; 3.2; 3.7
- Current Account Balance: 5.8–3.0; 3.3; 7.; 5.3; 2.1
- Overall Fiscal Balance: 1.4–7.9; –2.5; 1.4; –1.5; –2.2
- Inflation (year average; percent): 7.; 2 10.4; 12.8; 14.; 15.9; 12.0

ME&CA oil exporters
- Real GDP (annual growth): 4.5–3.9; 4.7; 5.4; 3.2; 3.2
- of which non-oil growth: 5.6–3.7; 5.8; 4.0; 3.7; 3.5
- Current Account Balance: 8.9–2.8; 6.5; 12.5; 6.5; 4.3
- Overall Fiscal Balance: 3.3–8.5; –1.0; 4.3; 0.2; –0.6
- Inflation (year average; percent): 6.7 8.7; 11.; 013.; 13.6; 12.1; 8.7

ME&CA emerging market and middle-income countries
- Real GDP (annual growth): 4.2–0.8; 4.6; 5.6; 2.4; 4 .1
- Current Account Balance: –3.6– 3 .1; –3.5; –4.8; –3.5; –3.5
- Overall Fiscal Balance: –5.4–7. 3; –6.3; –6.2; –6.6; –7. 2
- Inflation (year average; percent): 7.1 8.2; 7. 8; 11. 5; 21.5; 17.1

ME&CA low-income developing countries
- Real GDP (annual growth): 4.4–1.4; 4.3; 3 .1; 3.5; 4.3
- Current Account Balance: 1.0– 5 .1; –6.8; –4.8; –6.8; –6.4
- Overall Fiscal Balance: –2.0–3.8; –2.8; –2.7; –2.7; –2.5
- Inflation (year average; percent): 13.9 38.9 67. 0 3 8 .1; 24.7; 19.4

### MENA: Selected Economic Indicators, 2000–24
- Real GDP (annual growth): 4.2– 3 .1; 4.3; 5.3; 3 .1; 3.4
- of which non-oil growth: 5.2–3.0; 5.2; 4.0; 3.6; 3.7
- Current Account Balance: 6.8–3.3; 4.2; 9.0; 4.5; 2.7
- Overall Fiscal Balance: 1.6–8.4; –2.0; 2.5; –1.0; –1.7
- Inflation (year average; percent): 7.1 10.9; 13.9; 14.8; 14.8; 11.1

MENA oil exporters
- Real GDP (annual growth): 4.3– 4 .1; 4.7; 5.7; 3 .1; 3.0
- of which non-oil growth: 5.5–3.9; 5.9; 3.8; 3.7; 3.5
- Current Account Balance: 9. 6–2.9; 7. 2; 13.0; 6.9; 4.6
- Overall Fiscal Balance: 3.3– 8.9; –0.8; 4.6; 0.4; –0.5
- Inflation (year average; percent): 6.6 9.0; 11. ; 13. 3; 13.5; 12.0; 8.7

MENA emerging market and middle-income countries
- Real GDP (annual growth): 4 .1–0.5; 3.6; 5 .1; 3.4; 4.4
- Current Account Balance: –4.0–3.7; –4.7; – 5 .1; – 4 .1; – 4 .1
- Overall Fiscal Balance: –5.8–7. 4; –6.6; –5.6; – 6.9; –7.1
- Inflation (year average; percent): 7.1 6.8; 7.1; 11. ; 219.1; 14.9

MENA low-income developing countries
- Real GDP (annual growth): 2.2– 4 .1; 0.6; –0.6; 1.3; 2.9
- Current Account Balance: –3.5–12.0; –8.4; –8.8; –10.5; –9. 8
- Overall Fiscal Balance: –3.2–3.8; –0.2; –1.7; – 2.1; –1.8
- Inflation (year average; percent): 17.1 9 2.1 175 .9 83.2 45.9 35.0

MENA excl. conflict-affected countries
- Real GDP (annual growth): 4.3–2.7; 3.9; 5.6; 2.9; 3.3
- of which non-oil growth: 5.3–2.7; 5.2; 4.2; 3.4; 3.6
- Current Account Balance: 6.8–3.2; 4.3; 9.1; 4.6; 2.7
- Overall Fiscal Balance: 1.6–8.2; –2.2; 2.5; –1.1; –1.8
- Inflation (year average; percent): 7.1 10.9; 14 .1; 14.9; 15.0; 11. 2

MENA excl. fragile states and conflict-affected countries
- Real GDP (annual growth): 3.9–1.7; 3.9; 5.7; 2.9; 3.3
- of which non-oil growth: 5 .1–1.4; 4.5; 4.5; 3.5; 3.6
- Current Account Balance: 7. 6–2.3; 4.4; 9. 5; 4.9; 3.4
- Overall Fiscal Balance: 1.9–7.9; –2.4; 2.3; – 0.9; –1.5
- Inflation (year average; percent): 6.8 8.4; 9. 6; 12.6; 13.9; 10.7

MENAP
- Real GDP (annual growth): 4.3–2.8; 4.5; 5.4; 2.7; 3.4
- of which non-oil growth: 5.2–2.7; 5.3; 4.3; 3 .1; 3.7
- Current Account Balance: 6.4–3.0; 3.8; 7. 8; 3.9; 2.3
- Overall Fiscal Balance: 1.3–8.2; –2.4; 1.6; –1.5; –2.3
- Inflation (year average; percent): 7.1 10.8; 13. ; 14.4; 16.4; 12.5

Gulf Cooperation Council
- Real GDP (annual growth): 4.2–4.7; 3.5; 7. 7; 2.9; 3.3
- of which non-oil growth: 5.9– 4 .1; 5.2; 4.9; 4.2; 3.9
- Current Account Balance: 12.8–1.1; 8.6; 15. 2; 8.6; 6.5
- Overall Fiscal Balance: 6.0–8.0; 0.0; 6.0; 2.4; 1.6
- Inflation (year average; percent): 2.3 1.3; 2.2; 3.3; 2.9; 2.3

Arab World
- Real GDP (annual growth): 4.5–4.5; 4.2; 5.9; 3.3; 3.7
- of which non-oil growth: 5.5–4.2; 5.4; 4.4; 3.9; 4.0
- Current Account Balance: 7. 4–3.5; 4.3; 9.4; 4.8; 2.8
- Overall Fiscal Balance: 2.4–8.6; –1.8; 3 .1; –0.5; –1. 2
- Inflation (year average; percent): 4.8 6 .1; 9.1; 8.9; 9.9; 7. 7

Arab World oil exporters
- Real GDP (annual growth): 4.7–6.5; 4.7; 6.7; 3.4; 3.4
- of which non-oil growth: 6.0– 6 .1; 6.4; 4.2; 4.2; 3.9
- Current Account Balance: 11. 3–3.2; 7. 7; 14.0; 7. 6; 5.0
- Overall Fiscal Balance: 4.8–9. 2; –0.3; 5.7; 1.2; 0.3
- Inflation (year average; percent): 3.0 1.3; 3.2; 4.2; 3.9; 2.8

### CCA: Selected Economic Indicators, 2000–24
- Real GDP (annual growth): 6.7– 2.1; 5.6; 4.8; 4.2; 4.5
- Current Account Balance: –0.2–3.0; –0.6; 5.8; 1.1; 0.5
- Overall Fiscal Balance: 2.0–5.4; –3.0; 0 .1; –1.6; –1.4
- Inflation (year average; percent): 8.9 7. 4; 9. 6; 13.0; 11. ; 8.5

CCA oil and gas exporters
- Real GDP (annual growth): 7. 0–3.0; 4.5; 3.3; 3.8; 4 .1
- of which non-oil growth: 7. 0– 2.1; 5.3; 5.2; 3.4; 3.2
- Current Account Balance: 0.2–2.4; 1.5; 8.6; 3 .1; 2.5
- Overall Fiscal Balance: 2.6–5.6; –2.3; 1.4; –1.1; –0.8
- Inflation (year average; percent): 7. 7 5.9; 9. 2; 14. 3; 13.0; 8.7

CCA emerging market and middle-income countries
- Real GDP (annual growth): 5.9– 6.9; 8.5; 11.1; 4.6; 5.0
- Current Account Balance: – 9.1–8.6; –7. 5; –1.7; –3.0; –3.8
- Overall Fiscal Balance: –1.7– 6.9; –4.6; –1.9; – 2.1; –1.9
- Inflation (year average; percent): 4.3 3.5; 8.6; 10.5; 6.4; 4.0

CCA low-income developing countries
- Real GDP (annual growth): 6.4 1.2; 7. 3; 6.0; 5 .1; 5.2
- Current Account Balance: 1.0–3.0; –5.5; –1.1; –4.0; – 4 .1
- Overall Fiscal Balance: 0.0–4.3; –5.0; –3.6; – 3 .1; – 3 .1
- Inflation (year average; percent): 13.0 11.7; 10.7; 11.1; 11. ; 9. 3

*Sources: National authorities; and IMF staff calculations and projections.*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2023/april/english/ch2.pdf_