MPO 04/2025 Middle East and North Africa MACRO POVERTY OUTLOOK Country-by-country Analysis and Projections for the Developing World © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Algeria Morocco Bahrain Oman Djibouti Palestinian territories Egypt, Arab Republic Qatar Iran, Islamic Republic Saudi Arabia Iraq Syrian Arab Republic Jordan Tunisia Kuwait United Arab Emirates Lebanon Yemen, Republic Libya Middle East and North Africa Macro Poverty Outlook / April 2025 1 This outlook reflects information available as of April 10, 2025. 1 ALGERIA Population Poverty million 46.8 .. 2 3 Life expectancy at birth School enrollment Driven by investment, Algeria’s non-hydrocarbon growth re- years primary (% gross) mained dynamic in 2024, while inflation eased. Pressure mounts on fiscal and external balances amid shrinking hy- 77.1 108.8 4 5 drocarbon exports, robust imports and surging public GDP GDP per capita spending, heightening exposure to volatile oil markets. current US$, billion current US$ Continued private-sector-led diversification and public sec- tor modernization, along with gradual fiscal rebalancing, 263.6 5631.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. are essential to sustainable, job-creating growth. Growth has been robust since the pandemic, despite moderating Key conditions and challenges hydrocarbon production, but inflation rose markedly, driven by food prices. Growth was fueled by public spending rising by over Despite diversification efforts, Algeria’s economy remains de- 60 percent between 2021 and 2023, amid increasing public sector pendent on the oil and gas sector, which accounted for wages and pensions, the introduction of unemployment benefits, 14 percent of GDP, 83 percent of exports, and 47 percent expanding food subsidies, and surging public investment. The con- of budget revenues between 2019 and 2023. Significant im- current soar in hydrocarbon prices narrowed the fiscal deficit and provements in living standards, education, and health took resulted in current account surpluses in 2022 and 2023. However, place prior to the pandemic, but youth and female un- falling prices and OPEC quota cuts, coupled with dynamic invest- employment remains elevated. While no recent information ment-driven imports and strong spending growth have put the fis- is available on monetary poverty and inequality indicators, cal and external balances under renewed pressure. World Bank projections suggest that poverty headcounts are lower than the regional average. Recent developments Algeria’s public sector has been at the core of its development model, but productivity growth and diversification have been GDP growth slowed slightly to 3.3 percent y-o-y during the first limited, prompting the introduction of reforms to boost invest- nine months of 2024, down from 4.1 percent in 2023, as broad- ment and private sector development. The 2022 Investment based non-extractive growth (+3.9 percent y-o-y) compensated for Law, the 2023 Banking and Monetary Law, the 2023 Economic contracting extractives (-3.3 percent y-o-y) due to lower oil and Land Law, and efforts to dynamize the stock exchange evidence gas production. Surging public spending supported consumption the government’s commitment to a diversified, private-sector-led and investment, boosting services and industrial activity, but also model of growth and job creation, while maintaining the social imports. Agricultural growth was robust, with satellite data sug- role of the state. gesting that production improved in the East but weakened in the FIGURE 1 / Real GDP and components, indices (2019=100) FIGURE 2 / Hydrocarbon prices and fiscal and external balances Index, 2019=100 Percent of GDP US$ 140 10 120 130 5 100 120 0 80 110 100 -5 60 90 -10 40 80 -15 20 70 2019 2020 2021 2022 2023 2024e 2025p 2026p 2027p 2019 2020 2021 2022 2023 2024e 2025p 2026p 2027p Consumption Investment Exports Current account balance (lhs) Fiscal balance (lhs) Imports GDP Brent crude price (rhs) Sources: Algerian authorities and World Bank staff estimates. Sources: Algerian authorities and World Bank staff estimates. 2 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. West. Night-time lights data suggest a cross-regional non-extrac- tive growth acceleration in the fourth quarter of 2024. Outlook The current account narrowed to an estimated 1.4 percent of GDP GDP growth is expected to slow to 3.2 percent in 2025 as hydro- deficit in 2024, down from a 2.4 percent surplus in 2023, as the carbon production and exports recover, tracking OPEC quotas but goods trade surplus narrowed from US$10.4 billion to US$3.9 bil- public investment is consolidated in response to lower hydrocar- lion. Goods exports fell by US$3.3 billion, due to contracting vol- bon prices and revenues. Nonhydrocarbon growth would moder- umes of hydrocarbon, fertilizer, iron and steel products exports, ate, as public spending growth decelerates, and GDP growth would and lower commodity prices. Product imports rose by US$3.2 bil- slow slightly in 2026 and 2027. lion, amid a surge in food and equipment and vehicles imports, de- spite lower import prices. Official reserves decreased, from 16.0 to The current account deficit would widen due to declining an estimated 14.4 months of imports by end-2024. hydrocarbon exports and private investment-driven imports. The fiscal deficit would remain elevated because revenue The budget deficit widened from 5.5 to an estimated 13.5 percent growth would be constrained by declining hydrocarbon rev- of GDP in 2023-2024. Hydrocarbon export revenues contracted, enues, only partially offset by the fiscal consolidation effort while tax revenues grew modestly. Public spending kept expanding foreseen in the government’s medium-term framework, a re- rapidly, amid rising public investment, wage bill and transfers. Pub- duction in public investment, and modest tax revenue in- lic debt increased slightly, from 47.7 to an estimated 49.1 percent creases tracking investment and consumption growth. With of GDP, as the deficit was mostly financed by exhausting hydrocar- hydrocarbon savings exhausted, the deficit would translate bon savings. Public debt remains almost completely domestically into rapidly expanding public debt, reaching 74 percent of held at long-term maturities and low interest rates. GDP by 2027. Money supply growth accelerated, and growth of credit was robust Fluctuating hydrocarbon prices represent a key downside risk to (+5.8 percent). Monetary policy remains accommodative with inter- Algeria’s growth, fiscal and external balances outlook, exacerbat- est rates unchanged at 3 percent since May 2020. Inflation deceler- ed by trade uncertainty and other geopolitical factors. Climate ated from 9.3 percent in 2023 to 4.0 percent in 2024, tracking food shocks could also affect Algeria’s agricultural output, imports and prices, as agricultural production accelerated, subsidies expanded, prices, while the global low-carbon transition could lower hydro- import prices moderated, meat imports were authorized, and the carbon demand, with supply increasingly constrained by growing dinar remained stable. Together with rising transfer payments, it domestic consumption. The introduction of the European Carbon supported living standards among vulnerable Algerians. Border Adjustment Mechanism could lower the competitiveness of Algeria’s nonhydrocarbon exports, concentrated in fertilizers GDP per capita growth was positive in 2024, and household welfare and iron and steel products. may have benefited from declining prices, including food, the rise in civil servants’ wages and pensions, and the introduction of new Algeria’s successful economic transformation will hinge on its abili- unemployment benefits. A recent ONS publication indicates ty to foster rapid, private-sector-led growth and job creation, to en- 450,000 new jobs were created in 2024 and national unemploy- sure sustainable and inclusive development. Diversification away ment stood at 9.7 percent at end-2024. The previous available rate from carbon-intensive growth, exports, and fiscal revenues, togeth- dates to May 2019 (11.4 percent). er with a gradual fiscal rebalancing, will be crucial. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.6 4.1 3.3 3.2 3.1 2.8 Private consumption 3.6 4.1 3.7 3.3 2.9 2.6 Government consumption 2.8 3.4 2.8 2.5 2.2 1.8 Gross fixed capital investment 2.6 9.9 10.4 3.4 5.0 5.1 Exports, goods and services -0.1 3.4 -3.6 4.4 2.2 1.2 Imports, goods and services -0.2 17.9 11.9 4.4 5.0 4.6 Real GDP growth, at constant factor prices 3.8 3.8 3.1 3.2 3.1 2.8 Agriculture 5.2 2.9 4.9 2.6 2.6 2.4 Industry 2.9 3.7 1.7 3.9 3.5 3.2 Services 4.1 4.0 3.6 2.8 2.8 2.6 Employment rate (% of working-age population, 15 years+) 36.6 37.1 36.7 36.6 36.5 36.6 Inflation (consumer price index) 9.3 9.3 4.0 4.3 4.1 3.9 Current account balance (% of GDP) 8.6 2.4 -1.4 -7.1 -6.3 -6.6 Fiscal balance (% of GDP) -3.0 -5.5 -13.5 -14.3 -13.4 -12.5 Revenues (% of GDP) 29.7 31.9 26.9 27.0 26.6 26.1 Debt (% of GDP) 48.1 47.7 49.1 60.9 67.8 74.2 Primary balance (% of GDP) -1.8 -4.3 -12.4 -13.0 -12.0 -10.9 GHG emissions growth (mtCO2e) 2.3 2.7 2.6 2.4 2.4 2.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 3 This outlook reflects information available as of April 10, 2025. 1 BAHRAIN Population Poverty million 1.6 .. 2 3 Life expectancy at birth School enrollment Notwithstanding lower oil production and elevated interest years primary (% gross) rates, Bahrain’s economic growth remains bolstered by the nonhydrocarbon sector. Sustained fiscal reforms have helped 79.2 93.7 4 5 improving fiscal and current account balances in 2024, particu- GDP GDP per capita larly important amid elevated uncertainty. Yet further fiscal current US$, billion current US$ consolidation measures are needed to bring down the elevat- ed debt levels. Key risks include uncertainty on global growth, 47.7 29547.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. oil market volatility, and delays in additional fiscal adjustment. given that exports to some large markets account for a relative- Key conditions and challenges ly modest. Public debt levels remain high and the foreign reserves low, raising fiscal and external vulnerabilities over the medium Bahrain has actively pursued diversification efforts as part of its term. A gradual phasing out of energy subsidies and investments Economic Vision 2030 strategy, with the non-oil sector now ac- in renewable energy, would facilitate Bahrain’s climate transition counting for over half of GDP, led by infrastructure, gas, logistics, without creating additional fiscal needs or weighing on growth. financial technology and tourism sectors. Implementation of the Vision is underpinned by the Economic Recovery Plan (2022–26), which aim to raise standards of living, improve infrastructure, and Recent developments accelerate digital transformation, among others. On the fiscal front, a 5 percent VAT was introduced in 2019, with the rate dou- Growth is estimated to have reached 3 percent in 2024, thanks bling to 10 percent in 2022. Since January 1, 2025, Bahrain has ap- to a robust performance of the nonhydrocarbon sector. Prelimi- plied a domestic minimum top up tax (DMTT) to levy a minimum nary official data reveals that the economy grew by 1.9 percent 15 percent rate of tax on the profits of multinational enterprises in the first nine months of 2024 (9M-2024 y/y), driven primar- with global revenue exceeding €750 (US$828) million. Efforts are al- ily by a 3 percent expansion in the non-oil sectors, reflecting so underway to stimulate job creation in the private sector and in- ongoing diversification efforts. Government services, mainly fi- crease female labor force participation, supported by the National nancial and insurance activities, followed by manufacturing and Labor Market Plan 2023–2026. construction were the largest contributors to overall growth in non-oil activities, which outpaced the contraction in the oil sec- Despite progress on diversification efforts, Bahrain’s budget re- tor (falling by 3.8 percent) due to the maintenance activities at mains heavily reliant on volatile hydrocarbon revenues (64 per- the Abu Sa’afa field. Inflation remains contained at 0.9 percent cent), making it vulnerable to ongoing volatility in oil prices. The di- in 2024, up from 0.1 percent in 2023, driven by rising hotel and rect impact of recent shifts in trade policy is expected to be small, restaurant prices. FIGURE 1 / Real annual GDP growth FIGURE 2 / General government operations Percent change Percent of GDP 8 40 6 30 4 20 2 10 0 0 -2 -10 -4 -20 2021 2022 2023 2024e 2025f 2026f 2027f 2021 2022 2023 2024e 2025f 2026f 2027f Hydrocarbon GDP Non-hydrocarbon GDP Real GDP Revenues Expenditures Budget balance Sources: Bahrain authorities and World Bank staff estimates. Sources: Bahrain authorities and World Bank projections. 4 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Official fiscal data for 2024 are yet to be released. The lack of timely face tighter financial conditions from trade uncertainty related in- and regular reporting on the fiscal stance is a challenge consider- flationary pressure and disrupted global supply chains. ing its importance for macroeconomic monitoring and transparen- cy. The fiscal deficit for 2024 is estimated to have slightly narrowed Higher non-hydrocarbon revenues along with the implementation reflecting fiscal consolidation efforts. Government public debt is es- of the new announced corporate tax and the expanding capacity timated to remain elevated above 124 percent of GDP amid rising of Sitra oil refinery are expected to partially offset the current de- financing needs. cline in oil prices, to slightly narrow the fiscal deficit to 7.7 per- cent of GDP in 2025, from 8.4 percent of GDP in the previous year. The current account balance (CAB) recorded a surplus of 4.8 per- However, absent further fiscal consolidation measures, a poten- cent of GDP (US$2.3 billion) in 2024. The trade balance showed a tially sustained downturn in global energy prices and high interest surplus of 7.6 percent of GDP (US$3.6 billion), albeit lower than a burden will continue to pressure fiscal balances in 2026–27, keep- surplus of 9.7 percent of GDP in 2023, as the value of oil exports ing the deficit above 8 percent of GDP. Government debt will con- declined by 4.6 percent y/y. Remittances decelerated to 5.6 percent tinue to rise during 2025–2027 on high interest payments and ele- of GDP in 2024, down from 5.8 percent in 2023 y/y. The overall per- vated gross financing needs. formance of the CAB was mainly driven by 9.6 percent increase in the services exports (35.7 percent of GDP). These positive trends The current account balance will remain in surplus during helped official reserves to remain relatively stable at US$3.8 billion 2025–2027, albeit lower than its current level, in line with oil price in 2024—a slight decline of US$0.2 billion compared to 2023. outlook and the slump in the global demand, following the recent trade policy related uncertainty, which would weigh more heavily According to the ILO-modeled estimates, there were insignificant on Bahrain's aluminum export earnings (aluminum already subject changes in employment and unemployment rates in Bahrain be- to a 25 percent tariff). Foreign reserves are expected to decline re- tween 2023 and 2024 years. Employment rates were about 70 per- flecting lower hydrocarbon prices. cent, while unemployment rates were about 1 percent. Women had a higher unemployment rate than men in 2024 (0.4 versus 3.65 per- Key downside risks to the outlook arise from sharp fall in oil prices, cent), which was exceptionally high among female youth aged 15–24 elevated spending and delays to undertaking additional fiscal ad- (12.4 percent). No significant changes in employment and unemploy- justments which would pose fiscal and external vulnerabilities. The ment rates are expected in 2025, but some uncertainty remains. immediate direct impact of the trade uncertainty is expected to be limited, given that oil is exempted. Meanwhile, despite the impor- tance of aluminum as an export commodity, Bahrain’s high-quali- Outlook ty products and competitive prices of aluminum could mitigate any significant possible tariff impact and retain market share. Indirect Bahrain’s economic outlook hangs on oil market prospects and ac- risks arise from the slowdown in energy demand, and steep de- celerated implementation of structural reforms. Growth is expect- cline in oil prices which could exacerbate fiscal and external vulner- ed to accelerate to 3.5 percent in 2025, with the completion of BAP- abilities, and weigh on growth and debt dynamics. On the upside, CO refinery upgrades while oil production recovers. Over the medi- leveraging additional fiscal reforms and sustained higher oil prices um-term, real GDP is projected to grow to about 3 percent driven would reduce fiscal and external vulnerabilities and put debt on by robust non-hydrocarbon growth supported by the expansion of a firm downward path, while increase employment opportunities Sitra oil refinery. Given its currency peg to the USD, Bahrain could among youth, would ensure a private sector-led inclusive recovery. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.2 3.9 3.0 3.5 3.0 2.8 Private consumption 6.9 4.7 4.8 4.9 4.2 3.3 Government consumption 2.1 7.3 5.3 5.0 3.5 3.1 Gross fixed capital investment 18.7 2.1 2.4 4.0 4.2 4.1 Exports, goods and services 9.2 -9.1 2.0 2.6 3.5 3.6 Imports, goods and services 11.9 2.6 3.5 3.7 4.7 4.6 Real GDP growth, at constant factor prices 4.3 3.8 3.0 3.5 3.0 2.8 Agriculture 4.4 4.7 2.1 3.0 3.2 2.8 Industry 1.7 0.1 4.1 6.5 5.8 4.0 Services 6.2 6.5 2.3 1.4 1.0 1.8 Employment rate (% of working-age population, 15 years+) 70.9 70.9 70.9 70.9 70.9 70.9 Inflation (consumer price index) 3.6 0.1 0.9 1.8 2.2 2.4 Current account balance (% of GDP) 14.7 5.8 4.8 4.4 3.9 3.5 Net foreign direct investment inflow (% of GDP) 0.0 12.4 5.1 4.2 4.1 4.2 Fiscal balance (% of GDP) -5.1 -8.4 -7.9 -7.7 -7.9 -8.5 Revenues (% of GDP) 22.4 19.4 21.0 19.3 18.2 17.5 Debt (% of GDP) 111.1 123.0 124.5 127.1 131.0 134.3 Primary balance (% of GDP) -1.7 -4.4 -3.7 -4.3 -4.2 -4.2 GHG emissions growth (mtCO2e) 4.3 2.7 5.2 4.1 3.4 3.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 5 This outlook reflects information available as of April 10, 2025. 1 2 DJIBOUTI Population Poverty million millions living on less than $3.65/day 1.2 0.5 3 4 Life expectancy at birth School enrollment Economic activity continued its upward momentum in years primary (% gross) 2024H2, prompting a second revision of real GDP growth to 6.0 percent—a 0.1 percentage point increase from the 62.9 64.4 5 6 previous fall forecast. This expansion, alongside rising real GDP GDP per capita GDP per capita, is expected to alleviate poverty. The medi- current US$, billion current US$ um-term outlook remains positive with growth projected to moderate to 5.1 percent in 2025-27, partly driven by lower 4.3 3658.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. international oil prices amid increased OPEC+ production. 4/ 2021. 5/ 2024. 6/ 2024. the U.S. dollar has provided stability, a recent decline of foreign Key conditions and challenges reserves below the one hundred percent coverage of the money supply necessitates heightened vigilance to mitigate risks to the Djibouti has witnessed rapid economic expansion over the past currency board arrangement (CBA). decade. Growth averaged 6.2 percent annually from 2011 to 2019, fueled by debt-financed investments in transport and port infrastructure. However, this growth has come at a cost, exacer- Recent developments bating debt vulnerabilities and limiting fiscal space for essential social spending. Poverty remains widespread—by 2017, 19.1 per- Djibouti’s economy maintained strong momentum in 2024H2, cent of the population lived on less than US$2.15 per day, while propelled by a sharp increase in port activity, particularly in con- 43.8 percent fell below the US$3.65 threshold (2017 PPP). Human tainer traffic. Port operations surged by 31.4 percent year-on- capital remains underdeveloped, and the country ranks among year in 2024H2, averaging an impressive 49.1 percent annual the most unequal in the region, with a Gini index of 41. 6. The growth, largely driven by a staggering 239.5 percent spike in labor market remains constrained by low participation, especial- transshipment volumes. This surge continues to reflect strategic ly for women, and high unemployment, further exacerbated by diversion in regional shipping routes, as shipping from Asia to sluggish formal private sector growth. Europe increasingly bypass Red Sea conflict zones. While this has put Djibouti port in a favorable position, once the Red Sea Despite rising tensions in the Red Sea, Djibouti has demonstrat- shipping is normalized, the windfall is likely to quickly evaporate, ed resilience, bolstered by expanding transshipment activities. causing a reverse shock to the port and the broader economy. Positioned as a key transport and logistics hub in the region, Despite high energy costs, production and consumption rose by the country faces structural weaknesses, including a heavy re- 3.8 percent and 7.0 percent y-o-y in 2024Q2 respectively. Mean- liance on imports, making it vulnerable to global price swings while, the construction sector contracted by 21 percent due to and supply chain disruptions. While the fixed currency’s peg to persistent supply chain disruptions. Real GDP growth for 2024 FIGURE 1 / Real GDP growth, fiscal, and current account balances FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent change Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 40 90 700000 80 30 600000 6 70 500000 20 60 4 50 400000 10 40 300000 2 30 0 200000 20 100000 0 -10 10 2021 2022 2023 2024 2025 2026 2027 0 0 Real GDP growth, at constant market prices (lhs) 2012 2014 2016 2018 2020 2022 2024 2026 Current account balance (rhs) International poverty rate Lower middle-income pov. rate Fiscal balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: Government of Djibouti and World Bank staff projections. Source: World Bank. Notes: See footnotes in table on the next page. 6 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. has been revised upward to 6.0 percent—a 0.1 percentage point increase from the fall forecast. Outlook Despite rising freight costs fueled by the Red Sea crisis, inflation Djibouti’s medium-term outlook remains positive but vulnerable has remained contained, anchored by the currency’s peg to the to headwinds. Sharp declines in oil and metal prices are expected U.S. dollar. In 2024, Harmonized Index of Consumer Prices (HICP) to partially cushion the direct impact of ongoing trade policy un- inflation stood at 2.2 percent y-o-y, primarily driven by food prices certainty, supporting a modest improvement in real GDP growth (2.6 percent) and energy costs (3.0 percent). Economic growth has in 2025 compared to the previous fall forecast. Over the medium contributed to a decline in the international poverty rate (below term, growth is projected to average 5.0 percent in 2026–27, partly US$2.15 per person/day, 2017 PPP), from 19.1 percent in 2017 to fueled by logistics revenues, re-exports to Ethiopia, and major in- an estimated 14.9 percent in 2023. Similarly, poverty at the low- vestments in Damerjog Port and the DDID Free Trade Zone. Infla- er-middle-income threshold fell from 43.8 percent to 36.3 percent tion is expected to remain moderate at 2.1 percent over the fore- over the same period, though it remains high. Poverty levels in cast window as global prices stabilize. The ongoing debt moratori- 2024 are estimated at 14.5 percent (international poverty line) and um and expected restructuring will ease fiscal pressure, enabling 35.5 percent (lower middle-income threshold). the government to focus on consolidation and maintain a fiscal sur- plus over the period. With limited access to external financing and The overall fiscal balance improved from a deficit of 3.3 percent of fiscal surpluses, public debt is projected to decline. GDP in 2023 to a modest surplus of 0.2 percent in 2024, driven by tighter government spending and increased total revenue, includ- The external current account surplus is expected to rise from an ing grants, partly boosted by rising transshipment earnings. As of estimated 11.5 percent of GDP in 2024 to 14.1 percent in 2025, be- September 2024, public debt remains above 60 percent of GDP, fore settling at 11.4 percent in 2026–27, driven by revenue from the with over 70 percent linked to state-owned enterprises (SOEs). Ex- renewed military base agreement in Djibouti, notably with China, ternal arrears are estimated at 2.8 percent of GDP, with 18 percent France, and the United States. Poverty in 2025 is projected at 14.4 of these delays attributed to technical reasons. percent (international poverty line) and 35.9 percent (lower mid- dle-income poverty line), subject to substantial risks given the high The external sector in 2024 presented a mixed picture. The trade public debt and major risks to economic growth. balance recorded a surplus of 10.1 percent, fueled by rising exports and transshipment activities. However, net foreign exchange re- Downside risks remain significant and include: (i) escalating ten- serves declined, partly due to external debt service obligations. sions in the Red Sea and uncertainty over the stabilization of the Full reserve coverage of the money supply remained below the Red Sea shipping corridor, (ii) setbacks in macro-fiscal reforms, 100 percent threshold throughout the year, standing at an estimat- (iii) potential shifts in regional trade patterns, and (iv) the knock- ed 72.9 percent as of September 2024—a situation that calls for on effects of global trade policy uncertainty, which could dampen heightened vigilance to ensure the continued stability of the CBA. Ethiopia’s import demand and significantly reduce port traffic. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.7 6.7 6.0 5.2 5.1 5.0 Private consumption -0.6 4.4 5.4 6.0 6.1 6.2 Government consumption -14.3 8.1 12.6 -5.7 0.9 6.1 Gross fixed capital investment 2.7 12.4 9.4 0.5 5.8 7.9 Exports, goods and services -12.5 8.4 9.4 13.9 12.2 12.5 Imports, goods and services -6.2 10.4 12.5 13.0 13.7 15.0 Real GDP growth, at constant factor prices 4.0 6.7 6.0 5.2 5.1 5.0 Agriculture -0.5 5.9 5.9 5.9 5.9 5.9 Industry 7.2 10.0 9.7 8.3 8.0 7.8 Services 3.4 6.0 5.2 4.5 4.4 4.2 Employment rate (% of working-age population, 15 years+) 23.5 23.7 23.7 23.7 23.7 23.7 Inflation (consumer price index) 5.1 1.4 2.2 2.1 2.0 2.0 Current account balance (% of GDP) 17.9 15.6 11.5 14.1 12.9 9.8 Fiscal balance (% of GDP) -1.4 -3.3 0.2 3.3 3.4 3.7 Revenues (% of GDP) 18.9 17.3 23.6 23.8 23.6 25.1 Debt (% of GDP) 66.5 69.4 65.5 61.2 58.2 56.0 Primary balance (% of GDP) -0.7 -3.1 0.4 3.3 3.2 3.5 1,2 International poverty rate ($2.15 in 2017 PPP) 16.5 15.5 14.9 14.4 14.0 13.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 39.2 36.9 36.3 35.9 35.6 35.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 74.2 72.5 72.1 71.9 71.7 71.4 GHG emissions growth (mtCO2e) 0.4 0.5 0.5 0.8 1.0 1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2013-EDAM and 2017-EDAM. Actual data: 2017. Nowcast: 2018-2024. Forecasts are from 2025 to 2027. 2/ Projection from 2025 using point-to-point elasticity (2013-2017) with pass-through = 0.7 and 0.87 for 2024 based on GDP per capita in constant LCU. Projections till 2023 use neutral distribution (2017). Macro Poverty Outlook / April 2025 7 This outlook reflects information available as of April 10, 2025. ARAB REPUBLIC 1 2 Population Poverty million millions living on less than $3.65/day 106.6 14.7 OF EGYPT Life expectancy at birth years 3 School enrollment primary (% gross) 4 Growth is gradually recovering to a forecast 3.8 percent in 70.2 90.3 5 6 FY25, from 2.4 percent in FY24. Inflation declined but re- GDP GDP per capita current US$, billion current US$ mains high, thereby challenging poverty reduction. External accounts are under pressure, due to structural constraints, 389.1 3651.2 global trade uncertainties, and the Middle East conflict. Im- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. proved socioeconomic outcomes require accelerating re- 4/ 2023. 5/ 2024. 6/ 2024. forms to enhance the business environment and human capi- tal, whilst strengthening institutions and fiscal sustainability. Key conditions and challenges Recent developments Egypt is pursuing economic reforms, supported by the IMF, the Real GDP growth increased to 3.9 percent in H1-FY25 (July-December World Bank, and other development partners. External accounts 2024), up from 2.5 percent in H1-FY24. The uptick was driven by remain under pressure despite the adjustments since March 2024 tourism, transportation, non-oil manufacturing and ICT. Other key and the injected financing (including the Ras El Hekma deal). This sectors continue to be a drag on growth, notably the Suez Canal due is due to the scarring effect of the long-standing challenges related to the ongoing Middle East conflict, as well as extractives and oil refin- to the elevated public debt, sluggish exports, as well as the reper- ing, in light of the outstanding arrears owed by the government to in- cussions of the Middle East conflict on the Suez Canal. Further, the ternational oil companies (IOCs). Overall, the share of tradables (ex- shifting global trade policy contributed to uncertainties and capital port-oriented sectors) remained largely stable at 48 percent of real outflows from emerging markets, including Egypt. gross value added in H1-FY25, although lower than historical levels. World Bank estimates based on official data indicate that the na- The recent decline in unemployment to 6.4 percent in Q2-FY25 from tional poverty rate is at 33.5 percent in 2021/22, with higher rates 6.9 percent in Q2-FY24 has been associated with an uptick in the in Rural Upper Egypt. employment and labor force participation rates, but both remain low at 42.6 percent and 45.5 percent of the working-age population, Accelerating structural reforms to foster a conducive environment respectively, in Q2-FY25; limiting sustainable poverty reduction. for the private sector, strengthen institutions and macro-fiscal sta- bility, and advance human development is crucial for boosting pro- While remaining in double-digits, inflation declined sharply to 12.8 ductivity and improving socioeconomic outcomes. percent in February 2025, after surpassing 38 percent towards FIGURE 1 / Real GDP growth, employment and labor force FIGURE 2 / Net Foreign Assets (NFA) of the banking system participation rates Percent Percent of working-age population US$ Billion 12 50 30 10 20 40 8 10 6 30 0 4 20 2 -10 10 0 -20 -2 0 -30 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 -40 GDP growth (lhs) Employment rate (rhs) Labor force participation rate (rhs) CBE NFA Banks NFA Total NFA Sources: World Bank estimates based on Central Agency for Public Mobilization Source: Central Bank of Egypt (CBE). and Statistics (CAPMAS), and Ministry of Planning, Economic Development and International Cooperation (MoPEDIC). 8 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. end-2023, due to the dissipating impact of the steep parallel ex- The budget deficit is projected to surge to 7.2 percent of GDP in change rate depreciation a year earlier. Policy rates were held FY25 from 3.6 percent in FY24, due to higher interest payments steady at 27.25 percent and 28.25 percent for overnight deposits and a decline in non-tax revenues, compared to the previous year and lending transactions respectively through March 2025 (1,900 which had benefited from one-time revenues generated by the Ras bps above the levels prevailing prior to March 2022), given the El Hekma deal. However, fiscal consolidation is expected to resume prevailing negative real interest rates for key domestic monetary thereafter, supported by declining energy subsidies as well as im- instruments, including Treasury Bill rates (net of taxes). With the proving revenues. The government debt-to-GDP ratio is forecast to February drop in inflation, real interest rates are finally on a decline from 90.1 percent at end-FY24 to a projected 86.7 percent positive trajectory. at end-FY25, benefitting from the primary surplus and negative real interest rates prevailing during most of FY25. Nevertheless, contin- The poverty rate, measured by the lower middle-income country gent liabilities remain a concern as they have increased from 28.7 international poverty line, is estimated to have increased by about percent at end-January 2023 to 34.0 percent at end-June 2024, like- 4 percentage points between 2022 and 2024, despite government ly driven by off-budget borrowing to address the rising energy sec- compensatory measures. tor needs to avoid recurring power cuts. International financing alleviated the severe foreign currency External financing requirements remain substantial, with US$11.1 shortages, but the external accounts continue to face pressures. billion in external debt obligations maturing during Q4-FY25, in addi- International reserves increased to US$47.4 billion at end-February tion to the commitment to repay the arrears to IOCs. The current 2025 (6.7 months of FY25 merchandise imports), up from US$35.3 account deficit is projected to widen further in FY25 due to higher billion a year earlier. However, concerns persist with regards to for- gas imports, and a sluggish recovery of Suez Canal receipts. The re- eign exchange liquidity, as shown by commercial banks' Net For- cent drop in international oil and gas prices should help ease exter- eign Assets that have remained in negative territory for seven con- nal account pressures, but this may be counterbalanced by the po- secutive months through end-February 2025. tential subsequent decline in remittances (mostly from Egypt’s dias- pora in oil-exporting Gulf economies).The IMF financing, the recent sovereign Eurobond issuance, and other sources of international fi- Outlook nancing would help the country meet its near-term commitments. Growth is forecast to increase from 2.4 percent in FY24 to 3.8 per- Meanwhile, modest per capita growth and still elevated inflation cent, 4.2 percent and 4.6 percent in FY25, FY26 and FY27, respec- constrain poverty-reduction; with poverty rates expected to re- tively, driven by increased private consumption due to easing in- main stagnant in 2025, notwithstanding the most recent package flation and higher private investment. Risks however are tilted to announced in February 2025. Risks to the outlook emanate from the downside, if the ongoing shifts in global trade policy contribute the ongoing Middle East conflict, uncertainties around interna- to international supply chain disruptions and uncertainty that may tional trade and global growth, as well as potential fiscal and hurt investor sentiment. structural reform slippage. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 6.6 3.8 2.4 3.8 4.2 4.6 Private consumption 2.8 3.6 8.0 8.2 5.3 4.7 Government consumption 4.9 -2.8 0.2 3.2 2.0 2.4 Gross fixed capital investment 18.5 -16.6 -6.6 -9.8 16.8 13.2 Exports, goods and services 57.4 31.4 -10.6 13.5 15.0 12.0 Imports, goods and services 24.3 1.1 4.7 19.5 21.0 13.0 Real GDP growth, at constant factor prices 6.2 3.6 2.3 3.8 4.2 4.6 Agriculture 4.0 4.1 3.8 2.8 2.9 3.0 Industry 6.9 -0.6 -1.9 1.7 3.3 4.2 Services 6.2 6.2 4.6 5.2 4.9 5.2 Employment rate (% of working-age population, 15 years+) 40.9 40.4 40.4 41.0 41.6 42.2 Inflation (consumer price index) 8.5 24.1 33.6 20.9 15.5 12.2 Current account balance (% of GDP) -3.5 -1.2 -5.3 -6.3 -4.7 -2.7 Net foreign direct investment inflow (% of GDP) 1.8 2.5 11.7 2.5 2.1 1.9 Fiscal balance (% of GDP) -6.2 -6.0 -3.6 -7.2 -6.5 -5.5 Revenues (% of GDP) 17.2 15.4 18.3 16.3 17.1 18.1 Debt (% of GDP) 88.3 95.2 90.1 86.7 82.7 79.4 External government debt (% of GDP) 19.5 25.1 27.3 25.7 24.4 23.6 Primary balance (% of GDP) 1.3 1.6 6.2 3.9 4.1 4.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 13.2 15.5 17.1 17.0 .. .. GHG emissions growth (mtCO2e) 1.9 1.0 0.4 1.1 1.5 1.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2010-HIECS, 2015-HIECS, and 2021-HIECS. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2010-2015) with pass-through = 0.01 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 9 This outlook reflects information available as of April 10, 2025. IRAN, ISLAMIC 1 2 Population Poverty million millions living on less than $6.85/day 91.4 18.0 REPUBLIC Life expectancy at birth years 3 School enrollment primary (% gross) 4 Growth is moderating due to declining oil exports and the 74.6 104.5 5 6 impact of energy shortages on non-oil activity. While unem- GDP GDP per capita current US$, billion current US$ ployment has fallen, labor force participation remains low. Tighter monetary policy helped curb inflation, but recent 436.9 4781.7 geopolitical tensions have triggered currency depreciation, Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. with potential negative impact on inflation and poverty. The 4/ 2020. 5/ 2024. 6/ 2024. outlook is fraught with risks, including the impact of intensi- fied sanctions, regional conflict, and rising trade uncertainty. 6 percent. Labor force participation remains low at 41 percent Key conditions and challenges and disproportionately so for women, at just 14.1 percent. An aging population and high emigration further constrain human Oil production has been declining in 2024/25 (the Iranian calendar capital accumulation and pose additional fiscal pressures for year ending March 20) due to stricter enforcement of US sanctions the longer-term. and moderating oil demand in China. Non-oil growth remains con- strained by sanctions, energy shortages, and heightened uncer- The government faces a persistent fiscal deficit. Expenditures tainty from the conflict in the region. dominated by under-targeted cash transfers and a growing wage bill and pension spending drive fiscal pressures that are exacer- The heavily subsidized energy sector, burdened by underinvest- bated by volatile oil revenues. As the real value of transfers de- ment and inefficiencies, is experiencing frequent gas and electricity clines with rising living costs, shielding recipients from high infla- outages. Infrastructure investment could help address supply chal- tion without exacerbating the deficit would require transfer cuts lenges, but the country faces financial constraints, and technology for higher-income groups. transfer is impeded by sanctions. Tariff reforms could ease de- mand-side pressures but must be carefully designed given their short-term inflationary impact. Recent developments Despite the recent employment growth, job creation remains GDP growth slowed to 3.7 percent year-over-year (Y-o-Y) in the inadequate for a growing population. Inadequate job creation first nine months of 2024/25 (9M-24/25), driven by the services has reduced the active labor force by 1.3 percent since before sector. Oil GDP growth decelerated to 6 percent (Y-o-Y), down the pandemic, despite the working-age population growing by from 20.3 percent in the same period last year. The non-oil sector FIGURE 1 / Real GDP growth and supply-side contributions to real FIGURE 2 / Exchange rates (ER) and inflation GDP growth Percent, percentage points Thousand Rials per 1 US$ Percent 6 1000 12 Introduction of 4 800 commercial forex system 10 8 2 600 6 0 400 4 -2 200 2 -4 0 0 -6 2018/19 2020/21 2022/23 2024/25e 2026/27f Oil Agriculture Non-oil industries Inflation, M-o-M (rhs) Parallel market ER (lhs) Services Net taxes GDP growth CBI trade ER (lhs) Weighted average ER (lhs) Sources: Central Bank of Iran and World Bank staff calculations. Sources: Central Bank of Iran, Statistical Center of Iran, and World Bank staff calculations. 10 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. grew by 2.9 percent (Y-o-Y), led by services. In line with economic activity, employment increased by 1.2 percent in 2024/25. Outlook Declining oil exports and rising expenditures added pressures on GDP growth is projected to decelerate in the medium term, with a government finances. While most tax revenues were realized in contraction in the oil sector due to stricter sanctions and subdued 2024/25, oil export revenues are reported to have fallen sharply global demand, including a slowdown in China. Non-oil growth in the second half of 2024/25. Government expenditures on goods is forecast to remain constrained by ongoing sanctions, energy and services also grew at an accelerated pace of 3.1 percent (in shortages, and heightened economic uncertainty. Climate-related real terms) in 9M-24/25. As a result, the fiscal deficit is estimated weather events, including water scarcity, will continue to weigh on to have widened to 3.1 percent of GDP in 2024/25. In 11M-24/25, the agriculture sector and impact the livelihood of the rural popu- the deficit of the Targeted Cash Subsidy Program reached 1.6 per- lation. The current account balance is projected to deteriorate, due cent of GDP. These fiscal pressures prompted additional borrowing to declining oil exports and lower projected oil prices. The fiscal from the National Development Fund and the banking system. deficit is forecast to widen in line with restricted oil revenues and the expected increase in transfers in response to accelerating infla- Tighter monetary policy and lower global commodity prices have tion. The pass-through from currency pressures and the rising fis- helped consumer price inflation to decelerate but price pressures cal deficit is expected to return inflationary pressures, dispropor- have reemerged. Inflation in 2024/25 is estimated to have tionately impacting low-income households. With a projected con- reached 35.4 percent. The prospects of intensified sanctions fol- traction in per-capita GDP, poverty is projected to increase to 20 lowing the US elections have elevated inflationary expectations percent in 2025/26 - as spatial and gender inequalities persist. and renewed exchange rate pressures. A more flexible exchange rate regime, introduced in 2024, briefly narrowed the gap be- Risks to Iran’s economic outlook have significantly tilted downward, tween the CBI trade exchange rate and the parallel market rate. primarily due to escalating geopolitical risks and rising trade un- Non-oil exports rose by 15.5 percent in 2024/25, outpacing im- certainty. Rising geopolitical tensions and the possible reimposition port growth of 8.2 percent, which helped narrow the non-oil and tightening of implementation of international sanctions could trade deficit by 14.2 percent to US$14.5 billion. have ripple effects throughout the real economy and disrupt finan- cial flows. Such risks could materialize in a sizable shock to oil Spurred by economic growth, poverty has continued to decline exports, a collapse in investment, disruption in trade with imme- from its peak during the pandemic, but a fifth of Iranians still live in diate neighbors, and a widening fiscal deficit. Monetary financing poverty. Poverty is estimated at 19.9 percent for 2023/24 based on of the fiscal deficit could reignite an inflationary spiral and neg- the Upper Middle Income International poverty line of US$6.85 in atively impact household welfare. A sharper economic slowdown 2017 PPP. This represents a continuing decline from a high of 29.3 in China and uncertainty in global trade policy could further impact percent in 2020/21 at the height of the Covid-19 pandemic. investment and growth. Recent history and projections 2022/23 2023/24 2024/25e 2025/26f 2026/27f 2027/28f Real GDP growth, at constant market prices 3.8 5.0 3.0 -1.6 0.6 1.5 Private consumption 8.7 4.1 2.6 1.0 1.3 1.3 Government consumption -3.6 -1.7 2.5 0.7 1.7 2.7 Gross fixed capital investment 6.7 7.2 1.9 -8.4 -5.7 -0.6 Exports, goods and services 8.2 17.1 6.1 -10.8 2.6 3.1 Imports, goods and services 7.5 3.0 -1.1 -14.8 -3.5 0.0 Real GDP growth, at constant factor prices 4.0 4.5 3.0 -1.6 0.6 1.5 Agriculture 1.1 0.2 3.4 1.8 1.0 0.8 Industry 7.4 7.1 2.8 -6.1 0.4 1.1 Services 2.7 3.8 3.1 0.6 0.7 1.8 Employment rate (% of working-age population, 15 years+) 37.2 37.9 37.9 37.7 37.5 37.4 Inflation (consumer price index) 46.5 52.3 35.4 42.0 43.2 44.5 Current account balance (% of GDP) 3.6 2.2 1.7 -1.6 -0.8 -0.1 Net foreign direct investment inflow (% of GDP) -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 Fiscal balance (% of GDP) -2.8 -2.9 -3.1 -4.6 -4.7 -4.9 Revenues (% of GDP) 11.0 11.1 9.9 8.6 8.5 8.3 Gross public debt (% of GDP) 30.1 29.5 32.6 36.5 38.2 39.5 Primary balance (% of GDP) -2.4 -2.4 -2.7 -4.1 -4.2 -4.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.8 3.3 3.1 3.3 3.3 3.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 21.9 19.9 19.0 20.0 20.1 19.7 GHG emissions growth (mtCO2e) 1.3 1.9 2.0 -2.9 0.5 2.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2014-HEIS, 2018-HEIS, and 2023-HEIS. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using average elasticity (2014-2018) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 11 This outlook reflects information available as of April 10, 2025. 1 2 IRAQ Population Poverty million millions living on less than $6.85/day 46.5 9.2 3 4 Life expectancy at birth School enrollment Iraq’s economy is growing supported by the fiscal spending years primary (% gross) boost to the non-oil sector and a gradual tapering of OPEC+ oil production cuts. The large expansion in government ex- 71.3 103.7 5 6 penditures and higher imports are weighing on fiscal and GDP GDP per capita external balances. Growth is projected to be dominated by current US$, billion current US$ the oil sector developments in the medium term. Risks to the outlook include oil market volatility amplified by trade 254.7 5479.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. uncertainty and heightened geopolitical tensions. 4/ 2007. 5/ 2024. 6/ 2024. prices, the public debt-to-GDP ratio has increased, highlighting Key conditions and challenges rising fiscal risks. Overall growth remains dominated by developments in the oil sec- Further policy reforms can enhance the nascent economic diversi- tor, despite sustained non-oil GDP growth. Considering the sig- fication drive towards private sector-led growth amid heightened nificant share of oil in the economy (58 percent of real GDP in trade uncertainty. Progress on digitalization and automation of 2023) overall growth has been volatile and followed the OPEC+ oil public finances helped improve non-oil revenue mobilization. Mea- production agreements. The non-oil sector meanwhile has grown sures to reduce fiscal rigidities and improved oil wealth manage- consistently aided by improved security conditions and benefitting ment can help mitigate fiscal risks. Reforms aimed at improving from the spillovers of the 2021-2022 oil windfall. Recently unveiled human capital accumulation, boosting female economic empow- infrastructure projects in the energy and transport sectors also erment, tackling the skills-jobs mismatch, pension system harmo- provide potential for growth and jobs and lay the foundations for nization, and improving the business environment can further in- economic diversification. centivize private sector participation. The recent large fiscal expansion and continued reliance on volatile oil revenues increase fiscal vulnerabilities. The 2023-25 Recent developments budget law encompasses a sharp rise in the wage bill and so- cial welfare that add to fiscal rigidities and restrict room for GDP growth is recovering from a two-year oil-based contraction. discretionary fiscal policy on pro-growth spending, especially in Real GDP is estimated to have contracted by 1.5 percent in 2024, human capital. The large investment expenditure targets have following a 2.9 percent contraction in 2023. Growth in 2024 was not materialized due to implementation challenges and absorp- weighed down by extended OPEC+ production cuts, including Iraq’s tive capacity constraints. Despite the partial execution of the voluntary cuts, which led oil GDP to decline by an estimated 6.2 budget envelopes in 2023 and 2024 and relatively stable oil percent. The non-oil sector is estimated to have grown by 5 percent FIGURE 1 / Real GDP growth and supply-side contributions to real FIGURE 2 / Actual and projected poverty rates and real private GDP growth consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant million LCU) 10 30 2.2 8 25 2.1 6 4 20 2.0 2 15 1.9 0 10 1.8 -2 -4 5 1.7 -6 0 1.6 2021 2022 2023 2024e 2025f 2026f 2027f 2012 2014 2016 2018 2020 2022 2024 2026 Oil Agriculture Non-oil industry International poverty rate Lower middle-income pov. rate Services GDP growth Upper middle-income pov. rate Real priv. cons. pc Sources: Iraq’s Authority of Statistics and Geographic Information Systems (ASGIS), and Source: World Bank. Notes: See footnotes in table on the next page. World Bank staff calculations. 12 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. buoyed by the fiscal expansion, improved agricultural sector out- put, and non-oil industry activity. Outlook Inflationary pressures eased in part due to easing global prices, GDP growth is projected to rebound in the medium term, albeit tem- normalization of trade finance, and tighter monetary policy. Head- pered by a lower oil price outlook. The tapering of OPEC+ oil produc- line and core inflation both eased to 2.5 percent y/y in 2024. tion cuts is expected to drive a bounce back in growth. Non-oil GDP is forecast to grow, albeit at a decelerating pace as the effect of previ- Higher oil revenues and under execution of the planned budget ous years’ fiscal stimulus dissipates. The fiscal deficit is projected to helped drive a fiscal surplus in 11M-24, albeit a declining one. widen due to of lower oil prices following global trade uncertainty Government revenues increased by 13.4 percent (y/y, nominal) and despite a significant projected downward adjustment to invest- in 11M-24 aided by improved tax and fee collection efforts ment expenditures, leading the debt-to-GDP ratio to rise to over 65 but from a narrow base. Expenditures grew by 25.3 percent in percent by 2027. Lower oil export revenues will also translate to a 11M-24 (y/y) driven by wage bill and oil investments but reached growing current account deficit, despite some import compression. 65 percent of the annual budget ceiling. As a result, the fiscal account recorded a surplus of 3.2 percent of GDP (on cash ba- Iraq’s cash transfer programs and universal public distribution sys- sis), almost half of the ratio in 11M-23. The sharp increase in tem are expected to continue shielding vulnerable households from imports drove down the current account surplus to 1.4 percent volatility in global markets. However, continued reliance on public of GDP in 2024 and foreign reserves coverage ratio declined to sector employment and welfare programs will not offer poor house- 11.4 months of imports. holds a sustainable path out of poverty. Trade-induced volatility in prices would likely affect households in the middle of the welfare dis- The national poverty rate in Iraq decreased to 17.5 percent in tribution, affecting poverty rates at the upper-middle income lines. 2023/24 from 18.9 percent in 2012 based on the Iraq Household Socio-Economic Survey. While comprehensive national data are The economic outlook is subject to risks, largely stemming from rising not available for the interim years, it is expected that living stan- trade uncertainty and geopolitical risks. With upcoming Iraqi presi- dards had deteriorated and poverty had increased due to the dential elections in November2025, a prolonged government forma- budgetary crisis and conflict with ISIS. Inequality remained stable tion could undermine the economic progress made to date and in- with a Gini coefficient of 30. The recent decrease in the pover- crease security risks. Disruptions to Iraq’s oil export routes or to ener- ty rate is accompanied by improvements in living conditions, as gy imports in the short term could affect the projected recovery path. measured by durable housing, ownership of assets, and access The impact of commodity price declines may be further com- to public services. However, labor force participation remains low pounded by the potential effects of global trade uncertainty. Im- at 38.1 percent, driven largely by limited economic participation proved regional security could open new transit routes and desti- from women. nation for Iraq’s exports, including through the Mediterranean. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.0 -2.9 -1.5 1.3 5.3 3.1 Private consumption 2.7 3.5 4.5 1.5 3.4 2.5 Government consumption 1.4 7.6 19.7 -1.8 1.4 1.5 Gross fixed capital investment 3.3 12.7 14.5 -20.4 8.1 3.1 Exports, goods and services 7.2 -3.6 -0.1 1.7 6.9 4.1 Imports, goods and services 27.9 13.3 21.0 -5.6 4.0 2.8 Real GDP growth, at constant factor prices 7.6 -2.9 -1.5 1.3 5.3 3.1 Agriculture -33.3 28.9 5.0 3.0 2.0 2.0 Industry 12.7 -6.3 -5.1 0.3 7.0 3.5 Services 2.7 1.9 5.0 3.0 2.5 2.6 Employment rate (% of working-age population, 15 years+) 34.6 34.8 34.9 35.0 35.0 35.1 Inflation (consumer price index) 5.0 4.4 2.5 4.0 3.7 3.2 1 Current account balance (% of GDP) 19.1 10.4 1.4 -6.0 -3.5 -3.1 1 Net foreign direct investment inflow (% of GDP) -0.8 -2.3 -2.8 -3.0 -2.8 -2.8 1 Fiscal balance (% of GDP) 12.7 0.9 -4.2 -10.2 -7.6 -7.2 Revenues (% of GDP) 38.9 41.1 45.3 37.0 38.8 39.1 1 Debt (% of GDP) 40.2 44.8 48.9 61.9 64.0 67.5 1 Primary balance (% of GDP) 13.1 1.6 -3.3 -8.7 -6.0 -5.5 2,3 International poverty rate ($2.15 in 2017 PPP) .. 0.1 0.1 0.1 0.1 0.1 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 1.9 1.7 1.8 1.6 1.6 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 20.4 19.3 19.5 18.9 18.7 GHG emissions growth (mtCO2e) 5.8 1.1 4.0 5.0 5.6 4.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Share of factor cost GDP. 2/ Calculations based on 2023-IHSES. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2023) with pass-through = 0.7 (Low (0.7)) based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 13 This outlook reflects information available as of April 10, 2025. 1 JORDAN Population Poverty million 11.6 .. 2 3 Life expectancy at birth School enrollment Jordan demonstrated resilience amid external shocks, but years primary (% gross) growth remains too slow to substantially reduce unemploy- ment. In the first three quarters of 2024, growth averaged 74.2 98.3 4 5 2.4 percent. The fiscal deficit widened due to higher interest GDP GDP per capita payments. Despite global trade headwinds, medium-term current US$, billion current US$ growth is projected to average 2.5 percent. To reduce pover- ty and promote shared prosperity, Jordan must boost pro- 53.3 4613.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. ductivity and strengthen the investment climate. impacts. More frequent natural hazards underscore the need for Key conditions and challenges stronger resilience policies. Jordan’s prudent fiscal and monetary policies have upheld macroeconomic stability. After average annual growth rates of Recent developments 5.1 percent (1992–2003) and 7.5 percent (2004–2009), Jordan’s economy expanded at a lower average rate of 2.2 percent Despite regional challenges, real GDP grew by 2.4 percent in the (2012 and 2022). A series of adverse events—including the Iraq first three quarters of 2024. Manufacturing expanded by a record war, the Arab Spring, the Syrian conflict and the refugee influx, 4.3 percent in Q3—the highest since Q2-2011. Although regional the COVID-19 pandemic, and recent regional conflict—have conflicts led to a decline in tourist arrivals, services sector remained strained the economy. a key driver, contributing 1.1 percentage points to GDP growth, down from 1.5 percentage points a year earlier. Prolonged low growth has hindered job creation amid rapid pop- ulation growth. Unemployment has stayed above 20 percent since Labor force participation rose slightly to 34.3 percent - the highest 2020, while labor force participation remains low. since Q3-2021 – reflecting gains among both males and females. However, unemployment remained high at 21.5 percent, as a rise As a small, open economy with limited natural resources, Jordan in female unemployment -- driven by greater labor force participa- cannot rely on domestic consumption or resource exports for sus- tion, likely due to new graduates entering labor market -- offset the tainable growth. Fiscal constrains also limit the government’s ca- decline in male unemployment. pacity to support medium- and long-term development. Inflation decelerated to 1.6 percent in 2024, down from 2.1 percent Climate events are expected to further exacerbate water scarcity, in 2023, driven by tight monetary policy and favorable import reducing per capita availability and generating wider economic prices. Following a cumulative 525 basis-points policy rate increase FIGURE 1 / Tourist arrivals declined by 4 percent in 2024, yet FIGURE 2 / The overall fiscal deficit widened in 2024, affected by above the levels of 2019 and 2022 the economic slowdown and the conflict. In million tourists Percent of GDP 7 0 -1 6 -2 5 -3 4 -4 -5 3 -6 2 -7 1 -8 2020 2021 2022 2023 2024 0 Primary fiscal balance (excluding grants) 2019 2020 2021 2022 2023 2024 Overall fiscal balance (including grants) Sources: Ministry of Tourism and Antiquities, and World Bank staff calculations. Sources: Ministry of Finance and World Bank staff calculations. 14 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. between March 2022 and December 2023, real interest rates re- could generate positive spillover to Jordan. Given the vast needs in mained positive despite a 100-basis-point cut in 2024. The real ef- terms of reconstruction, Jordan is well-placed to provide the neces- fective exchange rate remained stable as lower domestic inflation sary inputs, skills and capital. Improved economic linkages in terms offset a stronger US dollar. of trade, investment and labor flows could leverage the human and social capital built over the past decade. The central government's (CG) overall fiscal deficit widened to 5.6 percent of GDP in 2024, driven by slower tax revenue and high- Inflation is projected to remain contained, supported by favor- er interest payments. Revenue weakened due to the slowdown able international prices for key imports. Annual headline infla- in economic activity and falling export prices. The government tion is expected to reach 2.2 percent in 2025 and to stabilize at raised taxes on e-cigarettes and electric vehicles in September 2.4 percent thereafter. 2024 to mitigate emerging tax gaps. On the expenditure side, capital spending was curtailed to approximately 70.0 percent of The overall fiscal deficit is projected to narrow with ongoing rev- the budgeted amount. enue efforts and controlled expenditures. However, fiscal pres- sures from utility companies are likely to keep debt levels elevated. The current account deficit widened to 5.6 percent of estimated Measures in the utility sector, alongside fiscal consolidation efforts, full year GDP in 9M-2024, relative to 5.4 percent in the same peri- could accelerate debt reduction. od in 2023, as lower travel receipts were partially offset by lower imports and higher current transfers. Exports remained stable at The current account deficit is projected to gradually narrow, sup- 18.7 percent of GDP. Portfolio investments declined to 2.4 per- ported by contained imports and a recovery in tourism. However, cent of GDP compared to 3.1 percent a year earlier, while FDIs recent trade policy uncertainty could affect investment and growth, witnessed a marginal decrease. At the end of 2024, CBJ’s gross with sectors highly exposed to markets undergoing significant pol- reserves stood at USD21.9 billion (close to 8.2 months of next icy changes likely to be disproportionately impacted. The full effect year's imports of GNFS), relative to USD18.1 (7.4 months of im- of these shocks remains difficult to assess, as relevant policies are ports of GNFS) at end-2023. still evolving. Nevertheless, adverse impacts from trade develop- ments may be partially offset by other factors, including shifts in global commodity prices, particularly oil, and the potential easing Outlook of interest rate. The external sector and the broader Jordanian economy remain vulnerable to regional instability and changes in Growth is projected to average 2.5 percent in 2025 and 2026 with a the global trade environment. gradual recovery expected from 2025, assuming an improvement in the regional security situation. The recent regime change in Syria To reduce poverty and promote shared prosperity, Jordan must has improved sentiment, but broader economic impact has yet to focus on inclusive, private sector-driven job creation. Investing in materialize due to ongoing uncertainties. As of March 14, 2025, UN- green infrastructure is crucial for securing water and energy re- HCR reports 48,000 refugees have returned from Jordan to Syria sources while creating jobs for high- and low-skilled workers. Sus- while 620,000 registered refugees - 565,000 of them Syrian - re- taining macroeconomic stability and improving debt management main. UNHCR’s February Flash Regional Surveys indicate that many are critical for sustainable growth. Further, strengthening social Syrian refugees express a desire to return but are adopting a cau- safety net, most recently through the doubling of National Aid tious ‘wait and see’ approach as the security situation continues Fund and the launch of new social protections strategy, is key to to evolve. A faster recovery in Syria and greater regional stability building resilience. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.6 2.7 2.4 2.4 2.5 2.8 Real GDP growth, at constant factor prices 3.0 2.9 2.5 2.5 2.6 2.9 Agriculture 3.9 5.9 3.8 2.4 2.4 2.4 Industry 4.4 3.5 3.0 2.5 2.4 2.2 Services 2.3 2.4 2.2 2.5 2.7 3.3 Inflation (consumer price index) 4.2 2.1 1.6 2.2 2.4 2.4 Current account balance (% of GDP) -8.1 -4.9 -5.5 -5.1 -4.9 -4.2 Net foreign direct investment inflow (% of GDP) 1.7 3.6 3.1 3.3 3.5 3.6 1 Fiscal balance (% of GDP) -5.8 -5.1 -5.6 -5.4 -5.2 -4.3 Revenues (% of GDP) 25.7 25.3 25.1 25.3 25.4 25.4 1 Expenditures (% of GDP) 31.5 30.4 30.6 30.7 30.6 29.8 2 Consolidated Debt (% of GDP) 88.6 89.2 90.5 89.8 88.7 86.6 2 Unconsolidated Debt (% of GDP) 111.2 113.8 116.9 117.8 118.1 117.3 1 Primary balance (% of GDP) -1.5 -0.4 -0.1 0.1 0.4 0.5 GHG emissions growth (mtCO2e) 3.1 0.8 0.9 1.7 1.9 2.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Including the Adjustment on receivables and payables (use of cash) as per IMF Country Report No. 23/49. 2/ Consolidated debt coverage excludes the SSC's investment arm holdings. Projections indicate that SSC's financial surplus will gradually decline, turning into a deficit, causing the consolidated debt to converge to the unconsolidated debt over time. Macro Poverty Outlook / April 2025 15 This outlook reflects information available as of April 10, 2025. 1 KUWAIT Population Poverty million 5.0 .. 2 3 Life expectancy at birth School enrollment The economy remained in recession in 2024 due to oil sec- years primary (% gross) tor contraction, but recovery is expected in 2025 with the gradual unwinding of OPEC+ production cuts. Recent disrup- 80.3 101.9 4 5 tions will have small direct effect on Kuwait given the oil ex- GDP GDP per capita emption from trade policy measures. Downside risks are current US$, billion current US$ stemming from trade headwinds, uncertainty on global growth, oil price volatility. Substantial financial buffers from 144.9 29244.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2015. 4/ 2024. 5/ 2024. past oil revenues provide a cushion against adverse shocks. spillovers through lower global demand, reduced trade volumes, Key conditions and challenges and weakened investor sentiment may be more pronounced. Diversification and fiscal sustainability remain essential for the Despite strong fiscal buffers, Kuwait remains exposed to external country’s development path and for its economic resilience in the risks, including tighter global financial conditions, oil price volatility, long-term. While substantial sovereign assets and oil revenues pro- global economic shifts, and regional geopolitical uncertainties. Pro- vide financial buffers, structural reforms are imperative to reduce longed reliance on hydrocarbons increases macroeconomic vul- hydrocarbon dependence and enhance private-sector growth that nerabilities, making timely fiscal and structural reforms critical to is necessary to create productive jobs and meet the youth aspira- maintaining stability and investor confidence. Delayed reforms tions. Achieving fiscal consolidation requires prudent expenditure could exacerbate fiscal pressures, constrain policy flexibility, and management, improved budget planning, and the mobilization of slow economic diversification. Additionally, the volatility of oil non-oil revenues. Strengthening the business environment and la- prices and geopolitical risks present further challenges. bor market is key to attracting investment and enhancing produc- tivity. However, political gridlock and delays in reform implementa- tion continue to hold back progress. Recent developments Recent developments have heightened global trade policy uncer- Kuwait’s real GDP contracted by 3.1 percent in the 9M-2024 pe- tainty. Direct effects on Kuwait’s exports are expected to be con- riod compared to the same period of the previous year and is tained, as these exports predominantly consisting of crude oil estimated to have shrunk by 2.9 percent for the full year, pri- which remains exempt from the recently introduced measures. marily due to OPEC+ production cuts. Oil output fell by 7 percent Concurrently, OPEC+ accelerated the pace of supply increases, rais- in the 9M-2024 period, reflecting the impact of these reductions. ing Kuwait’s production target to 2,443 kbd in May, potentially Despite the overall economic contraction, the non-oil sector is exerting additional downward pressure on oil prices. Indirect recovering, expanding by 1 percent during the same period. This FIGURE 1 / Annual real GDP growth FIGURE 2 / Fiscal balance Percent change Percent of GDP 15 60 12 50 9 40 6 30 3 20 0 10 -3 0 -6 -10 2022 2023 2024 2025 2026 2022 2023 2024 2025 2026 Oil GDP Non-Oil GDP GDP Fiscal Balance Revenue Expenditure Sources: Kuwait CSB, IMF WEO, and World Bank staff estimates. Sources: World Bank and IMF WEO. Notes: Exclude investment income and FGF transfers. 16 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. resilience is supported by a rebound in real credit growth which are gradually unwound starting in May 2025. The non-oil sector has recovered in 2024 after a slow down in 2023. Credit to the pri- is forecasted to expand by 1.6 percent in 2025, supported by a vate sector expanding by 4.7 percent in 2024, compared to 2.4 per- rebound in real credit growth and large-scale infrastructure pro- cent in 2023. Major infrastructure projects, including the Mubarak jects, including the Northern Special Economic Zone. Long-term Al-Kabeer Port and the Silk City initiative, are helping to stimulate growth prospects remain contingent on the effective implemen- non-oil activity, generate employment, attract foreign investment, tation of structural reforms and diversifying the economy. and reduce dependence on oil revenues. Inflation eased to 3.0 per- cent in 2024, down from 3.6 percent in 2023, reflecting diminishing The fiscal deficit is projected to widen to 7.2 percent of GDP demand-side pressures and lower imported food prices. in 2025, reflecting a decline in oil revenues despite ongoing expenditure containment measures. Public debt is expect- The fiscal deficit is estimated to have widened to 5.0 percent of ed to rise gradually from 2025 onward, assuming the im- GDP in 2024, up from 4.8 percent in 2023, driven by lower oil plementation of the Financing and Liquidity Law. Over the revenues, due to declining oil prices and OPEC+ production cuts, medium term, fiscal pressures are expected to persist as despite efforts to contain expenditure growth. The Kuwaiti dinar revenue losses from oil continue to outstrip consolidation remains pegged to a currency basket, ensuring a stable nominal efforts, particularly if reforms face delays or remain limited anchor for monetary policy. The current account surplus contin- in scope. Monetary stabilization is expected to remain closely ues to decline in 2024, while remaining elevated, and is estimat- aligned with global central bank policies, supported by a mod- ed to have reached 23.8 percent of GDP in 2024, down from erating inflation trajectory, which is projected to decline to 2.5 26.2 in 2023, reflecting the impact of lower oil prices and produc- percent in 2025. The external position is anticipated to remain tion on the trade balance. In 9M-2024, the trade surplus contract- strong, though the current account surplus is projected to mod- ed to 25 percent of GDP, down from 28 percent in the same peri- erate to 15 percent of GDP in 2025 due to lower oil export rev- od of 2023. This was partially mitigated an improvement in non-oil enues. Weaker oil prices and production are expected to con- exports, reaching 4.3 percent of GDP in 9M-2024 compared to 3.6 tinue to narrow the surplus, impacting the trade balance. The percent in the previous year. Net FDI continue to decline reaching pace of adjustment could accelerate if external buffers are not 5.0 percent of GDP in M 9 2024 comparing to 7.3 percent in the reinforced, or external conditions deteriorate. Nonetheless, sub- same period in 2023. FDI inflows remained weak due to structur- stantial sovereign assets will help cushion external vulnerabilities al barriers, despite recent regulatory reforms aimed at improving over the medium term. investment attractiveness such as amendment to the Commercial Law permitting full foreign ownership of local branches. Official Despite the overall economic contraction, ILO employment pro- reserve assets declined to US$44.5 billion in 2024 from US$47.5 jections for 2025 point to a growth of about 2.0 percent y-o-y, billion in 2023. Despite this decrease, reserves remain sufficient stronger among women (2.4 percent y-o-y), thanks to the recov- to support balance of payments needs. ery of the non-oil sector. This is in a context of roughly stable labor force participation and unemployment rates. The lat- ter is projected to hover around 2.1 percent in 2025, with Outlook virtually no change with respect to 2024. Yet, the unemploy- ment rate is estimated to remain significantly higher at 14.9 A recovery in real GDP from the oil sector is projected in 2025, percent among youth (15-24), with a peak of 28.3 percent with growth expected at 2.2 percent as OPEC+ production cuts among young women. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.3 -3.6 -2.9 2.2 2.7 2.7 Private consumption 1.8 1.1 2.8 2.6 2.5 2.5 Government consumption 3.9 1.2 1.4 2.1 2.4 2.8 Gross fixed capital investment 2.2 0.6 3.8 2.4 2.6 2.6 Exports, goods and services 12.0 -3.6 -5.4 2.4 2.9 2.7 Imports, goods and services 6.3 5.7 4.8 2.9 2.6 2.6 Real GDP growth, at constant factor prices 6.3 -3.6 -2.8 2.2 2.7 2.7 Agriculture 1.1 0.1 0.3 1.2 1.2 1.2 Industry 7.9 0.1 -2.1 2.5 2.4 2.3 Services 4.2 -8.8 -3.8 1.8 3.1 3.4 Employment rate (% of working-age population, 15 years+) 70.0 70.0 70.0 70.0 70.0 70.0 Inflation (consumer price index) 4.0 3.6 3.0 2.5 2.3 2.1 Current account balance (% of GDP) 32.4 26.2 23.8 15.0 17.6 20.2 1 Fiscal balance (% of GDP) 12.5 -4.8 -5.0 -7.2 -5.4 -5.0 Revenues (% of GDP) 55.0 43.5 44.0 44.0 46.6 46.1 1 Debt (% of GDP) 2.3 3.2 7.3 12.3 13.5 16.1 1 Primary balance (% of GDP) 12.7 -4.8 -4.9 -7.1 -5.3 -4.9 GHG emissions growth (mtCO2e) 4.6 2.3 1.8 5.0 5.9 6.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Based on fiscal year cycle (April to March 31). Fiscal balances exclude investment income and FGF transfers. Macro Poverty Outlook / April 2025 17 This outlook reflects information available as of April 10, 2025. 1 LEBANON Population Poverty million 5.8 .. 2 3 Life expectancy at birth School enrollment Real GDP is estimated to have contracted by 7.1 percent in years primary (% gross) 2024, bringing Lebanon’s cumulative decline since 2019 to nearly 40 percent. In 2025, following the end of the conflict 74.4 79.8 4 5 and resolution of political paralysis, real GDP is projected GDP GDP per capita to grow by 4.7 percent, the first positive growth since current US$, billion current US$ 2017, driven by anticipated reforms, recovering tourism, improved consumption, limited reconstruction inflows, and 26.0 4473.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. a base effect from the sharp prior contraction. to address Lebanon’s prolonged crisis through a comprehensive Key conditions and challenges recovery plan. Reforms are urgent as the country grapples with a five-year financial crisis, fallout from the recent conflict, and im- Thirteen months after the October 7 events and the conflict esca- mense reconstruction challenges ahead. lation between Israel and Lebanon in September 2024, a ceasefire between the two countries took effect on November 27, 2024. The The conflict and its aftermath are expected to deepen poverty conflict has claimed over 3,500 Lebanese lives, injured more than and vulnerability in Lebanon. Agriculture, commerce, and tourism, 14,500, and displaced nearly 1.2 million people—over a quarter of comprising 77 percent of losses, heavily impact low-wage and in- Lebanon’s population. formal workers. Agricultural losses particularly hurt southern com- munities, while disruptions in health, education, and housing By the end of 2024, Lebanon’s cumulative GDP decline since heighten long-term poverty risks. At its peak, the conflict displaced 2019 approached 40 percent, deepening Lebanon’s pre-exist- over 1.2 million people, with around 99,000 remaining internally ing multi-pronged crisis. The World Bank Rapid Damage and displaced. The mounting economic losses are exacerbating Needs Assessment (RDNA) estimates that physical asset dam- Lebanon's enduring socioeconomic challenges. age reached US$6.8 billion, economic losses totaled US$7.2 billion, and recovery and reconstruction costs amount to US$11 billion. Recent developments After more than two years, Lebanon’s political paralysis has end- Updated World Bank estimates indicate that the conflict with Israel ed with the election of former army chief Joseph Aoun as Pres- cut Lebanon’s real GDP growth for 2024 by 8 pp, up from an earlier ident in January 2025 and the formation of a new government projection of 6.6 pp before the conflict ended. As a result, real GDP under Prime Minister Nawaf Salam on February 8. The formation is now expected to contract by 7.1 percent in 2024, compared to a of a reform-committed government offers a crucial opportunity no-conflict growth estimate of 0.9 percent. FIGURE 1 / Recent exchange rate stabilization has driven a FIGURE 2 / Rising education costs were a key driver of overall deceleration in inflation inflation in 2024 Index (Aug 2019=100) Percent Contributions to overall inflation in 2024, percent 7,000 300 50 40 6,000 250 30 5,000 20 200 4,000 10 150 3,000 0 100 -10 2,000 -20 1,000 50 -30 0 0 Headline Inflation growth Education Owner occupied Food & non-alcoholic beverages Water,electricity,gas,&other fuels Health Transportation Actual rent World Bank average exchange rate (lhs) Clothing and footwear Communication Currency in circulation (lhs) Alcoholic beverages, tobacco Furnishings, household equipment Inflation rate (% yoy), (rhs) Other Sources: Lebanese authorities and World Bank staff calculations. Sources: Lebanese authorities and World Bank staff calculations. 18 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. A fiscal surplus (on a cash basis) of 0.5 percent is estimated for and December 2023 (excluding October, when the education CPI 2024 driven by stronger-than-expected revenue collection and component surged six-fold), and 1.4 percent in 2024. spending restraints despite the conflict. Total revenues in 2024, 77 percent of which come from taxes, reached 15.3 percent of Despite the ongoing economic crisis, sovereign default, and the GDP, surpassing the ratified budget estimates, in part due to bet- most recent conflict, Lebanon continued to record a significant cur- ter-than-expected tax collection rates in 9M-2024. Expenditures re- rent account (CA) deficit in 2024, reaching 22.2 percent of GDP, mained lower at 14.7 percent of GDP. Fiscal restraint was rein- primarily driven by a trade-in-goods deficit. Historically, trade-in- forced by spending restrictions on public institutions’ accounts goods deficits have been partially offset by a trade-in-services by Banque du Liban (BdL), contributing to a 45 percent increase surplus. However, the decline in tourism receipts due to the con- in public sector deposits between January 2024 and December flict led to a trade-in-services deficit of -3.3 percent of GDP in 2024. Before the conflict escalated in September 2024, the out- 2024. Historically weak BOP data, and the prevalence of a perva- going government approved a draft 2025 budget targeting a zero sive dollarized cash economy are likely to skew official estimates fiscal deficit, with revenues and expenditures at 15.9 percent of the current account deficit. of GDP. Although submitted to parliament, it was not discussed, prompting the new government to approve the budget by decree, as constitutionally permitted. Outlook The Lebanese pound has been stable at 89,500 LBP/US$ since July In 2025, following the end of the conflict and resolution of political 2023, following years of rapid depreciation. This stability has been paralysis with the election of a president and a reform-oriented largely sustained through improved revenue collection, rather than government, real GDP is projected to grow by 4.7 percent, support- a robust monetary framework. These surpluses act as fiscal steril- ed by anticipated reforms, recovering tourism and consumption, ization, as their accumulation at BdL reduces excess LBP liquidity, limited reconstruction inflows, and a base effect after a 40 percent preventing downward pressure on the exchange rate. However, cumulative GDP decline. However, several risks could weigh on this the reliance on fiscal sterilization as a mechanism for exchange outlook. A deterioration in the security situation may affect senti- rate stability largely hinges on continued fiscal restraint. Central ment, tourism, financial flows, and consumption. Additionally, the bank gross reserves (liquid reserves) have increased by US$447 impact of rising global trade uncertainty on Lebanon remains un- million in 2024, reaching US$10,089 million. clear. Although direct effects may be limited, given that exports to some large markets account for a modest 4 percent of Lebanon’s The annual average inflation rate in 2024 declined to 45.24 percent, total goods exports, the indirect effects will depend on how recent a level not seen since 2020, driven by exchange rate stabilization policy shifts affect the global economy. Assuming exchange rate since August 2023. This stabilization led to a steady decline in stability and no additional global inflationary pressures, Lebanon's month-to-month inflation, averaging 1.2 percent between August annual inflation is projected to average 15.2 percent in 2025. Recent history and projections 2022 2023 2024e 2025f Real GDP growth, at constant market prices -0.6 -0.8 -7.1 4.7 Private consumption 2.3 0.2 -4.6 2.2 Government consumption 34.9 -18.4 16.6 18.4 Gross fixed capital investment -88.6 4.5 -31.6 157.1 Exports, goods and services 0.3 -1.1 -9.7 1.9 Imports, goods and services 3.5 -0.3 -0.1 -0.5 Real GDP growth, at constant factor prices -0.6 -0.8 -7.1 4.7 Agriculture -0.8 -0.2 -7.1 4.7 Industry -0.6 0.1 -7.1 4.9 Services -0.6 -1.0 -7.1 4.7 1 Employment rate (% of working-age population, 15 years+) 40.5 40.5 39.0 37.6 Inflation (consumer price index) 171.2 221.3 45.2 15.2 Current account balance (% of GDP) -34.6 -28.1 -22.2 -15.3 Net foreign direct investment inflow (% of GDP) 2.2 2.9 1.1 1.9 Fiscal balance (% of GDP) -2.9 0.5 0.5 0.0 Revenues (% of GDP) 6.1 13.7 15.3 15.9 Debt (% of GDP) 179.7 179.7 176.5 151.7 Primary balance (% of GDP) -2.5 1.4 0.9 0.1 GHG emissions growth (mtCO2e) -6.1 2.7 -9.0 2.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ ILO data is through 2023, with 2024-2025 projections imputed using the World Bank model. These projections are highly uncertain due to the 2023-24 conflict's impact, causing a steep contraction in 2024 and a potential rebound in 2025, with the overall employment effect unclear. Macro Poverty Outlook / April 2025 19 This outlook reflects information available as of April 10, 2025. 1 LIBYA Population Poverty million 7.0 .. 2 3 Life expectancy at birth School enrollment The resolution of the Central Bank of Libya's crisis in years primary (% gross) September 2024 laid the ground for the resumption of oil production which exceeded its 10-year historical average. 72.2 106.9 4 5 Global economic prospects are clouded with uncertainty GDP GDP per capita which directly affects international energy markets and un- current US$, billion current US$ derscores the need for a transparent and effective unified budget in Libya. In the medium term, efforts should be 45.4 6515.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2006. 4/ 2024. 5/ 2024. channeled to peacefully rebuild and diversify the economy. Furthermore, the recent devaluation of the Libyan Dinar (LYD) Key conditions and challenges announced by the CBL should help support foreign exchange re- serves and control the high public spending. However, structural Libya is actively engaged in efforts to overcome its political chal- reforms are essential to diversify away from hydrocarbon rev- lenges. The UN and international community have launched initia- enues and shield the economy from fluctuations in international tives to address electoral laws and foster national dialogue, aiming energy prices. to unite the country and pave the way for elections. Despite com- plexities, these developments reflect a commitment to progress Efforts are underway to improve the accessibility and comprehen- and reconciliation, offering opportunities for Libya to move for- siveness of data for monitoring labor market and household out- ward and end long-standing conflict and division. comes in Libya. Labor force participation is 49.1 percent (National Labor Force Survey, 2022) and is much higher among men than The Government of National Unity (GNU), the Government of Na- women and youth. The public sector continues to play a significant tional Stability (GNS) and other stakeholders have not reached an role in providing employment, particularly in administration ser- accord for a unified budget for 2025. Consequently, budget spend- vices with limited job opportunities in the private sector. Libya has ing will continue to be covered on a monthly allocation basis. An not yet adopted a national poverty line, which makes targeting of agreement has been reached to terminate the oil-for-fuel barter programs and monitoring challenging. system, which has been in place since November 2021. This system will be replaced by a more transparent fuel procurement mech- anism and ensuring timely transfers of oil receipts to the Central Recent developments Bank of Libya (CBL) starting March 2025. The Libyan economy contracted by an estimated 2.9 percent in The global economic consequences from changes in trade policy 2024. The resolution of the CBL crisis in October 2024 paved are uncertain and will have direct implications on energy markets. the way for the resumption of oil production which surged by FIGURE 1 / Crude oil production and international price FIGURE 2 / LYD/USD exchange rate in the official and parallel markets bpd, million US$/bbl LYD/USD 1.4 140 8 1.2 120 7 1.0 100 6 0.8 80 5 0.6 60 4 0.4 40 3 0.2 20 2 0.0 0 1 0 Oil production (monthly) Oil production average (yearly) Crude oil price (rhs) Official Parallel Sources: OPEC and World Bank Commodity Markets Outlook, February 2025. Sources: Central Bank of Libya and World Bank staff calculations. 20 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 35 percent (q-o-q) in the last quarter of 2024. However, average Libya experienced high exchange rate volatility in 2024. The production for the entire year fell short of 2023 levels resulting gap between official and parallel exchange rate averaged 36 in oil GDP contracting by 6 percent. Meanwhile, robust private percent in Jan-Feb and rose sharply to 47 percent during consumption driven by a 10 percent increase in public wages Mar-Oct 2024 following the implementation of the foreign kept non-oil GDP growth robust at around 2 percent. In January currency tax and the uncertainty associated with the CBL cri- 2025, the NOC successfully ramped up production to 1.4 mbpd sis. With the resolution of the CBL crisis and the reduction with the aim to realize 1.6 mbpd by 2025. of the tax rate from 20 to 15 percent, the gap narrowed to 25 percent by November 2024 but widened again in subse- Inflation which is only officially measured in the Tripoli area hov- quent months to reach 32 percent by January 2025. More ered around its average of 2.1 percent in 2024 compared to 2.3 recently, the CBL announced the devaluation of the Libyan percent in 2023 with food and beverages prices contributing to Dinar by 13.3 percent in April 2025 to narrow the exchange 1.3 percent to overall inflation. However, due to the presence of rate gap and curb domestic demand originating from high a large shadow economy in Libya, official inflation figures do not public spending. capture price increases and volatility faced by households. The budget surplus stood at 0.3 percent of GDP in 2024. Total Outlook revenues reached 56.7 percent of GDP with a significant increase in non-oil revenues driven by tax collections from foreign cur- Assuming no disruptions, oil production is expected to average 1.3 rency exchange (10 percent of GDP) and CBL’s dividends (3 per- to 1.5 mbpd during 2025- 2027, respectively. Consequently, oil GDP cent of GDP). The non-oil revenues had softened the sharp fall is projected to grow by 17 percent in 2025 and 7 percent annually in oil receipts as a result of lower production levels and prices in during 2026-2027. Driven by robust private investments, especially 2024. On the other hand, public spending, which stood at 56.4 per- in the oil sector, non-oil GDP is anticipated to grow on average by 4 cent of GDP, increased by 2 percent compared to 2023 to reflect percent annually during 2025-2027. As a result, overall GDP is fore- higher current spending (2 percent) driven by higher wages and a casted to grow by 12.3 percent this year and average 6 percent in sharp fall in capital expenditure, which fell by 77.8 percent. In Dec the medium term. 2024, the GNU transferred LYD 21 billion from the unspent de- velopment budget (Chapter 3) to Ministry of Finance’s accounts to Inflation in Tripoli is likely to rise to 3.6 percent in 2025 to reflect finance future projects in 2025. the devaluation of Libyan Dinar, however, moderating global im- port prices would soften this hike. The implementation of the foreign currency tax, introduced in March 2024, resulted in tighter access to foreign currency and sup- Lower oil receipts will deteriorate both fiscal and external bal- ported the decline of merchandise imports by 6 percent during the ances in 2025, with the fiscal balance expected to register a 10 months of 2024. Moreover, the fall in oil exports by close to 9 deficit of 4.5 percent of GDP while the current account surplus percent, following the shutdown of export facilities amidst the CBL narrows to 3.2 percent of GDP. The twin balances are expected to crisis and declining oil prices, resulted in a narrowing merchandise improve in the medium term with the expansion of oil production trade surplus by 12 percent, reaching 23 percent of GDP. and the recovery of oil prices. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -8.3 10.2 -2.9 12.3 6.4 5.6 Private consumption -1.3 5.3 2.0 2.0 2.1 2.0 Government consumption -1.1 5.5 5.5 2.2 3.1 1.6 Gross fixed capital investment -1.3 -10.7 -26.6 3.0 5.3 3.6 Exports, goods and services -19.9 7.1 -6.9 19.7 8.5 7.8 Imports, goods and services -13.9 -16.5 -3.0 1.0 2.5 2.1 Real GDP growth, at constant factor prices -11.8 11.7 -2.9 12.3 6.4 5.5 Agriculture 10.0 6.8 -1.2 1.3 2.0 3.0 Industry -17.0 17.8 -5.9 15.8 7.2 6.6 Services -1.9 1.2 3.3 6.4 4.9 3.4 Inflation (consumer price index) 4.6 2.3 2.1 3.6 2.5 2.6 Current account balance (% of GDP) 21.2 3.0 4.5 3.2 15.6 20.7 Fiscal balance (% of GDP) 2.7 -0.1 0.3 -4.5 -1.8 0.1 Revenues (% of GDP) 64.1 57.9 56.7 48.5 46.3 44.9 Debt (% of GDP) 95.0 91.5 90.9 90.3 85.8 82.2 Primary balance (% of GDP) 2.7 -0.1 0.3 -4.5 -1.8 0.1 GHG emissions growth (mtCO2e) -4.9 -4.0 -3.4 4.6 2.0 1.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 21 This outlook reflects information available as of April 10, 2025. 1 2 MOROCCO Population Poverty million millions living on less than $3.65/day 38.1 3.3 3 4 Life expectancy at birth School enrollment The economy shows positive trends driven by strong exports, a years primary (% gross) declining budget deficit, and lower inflation. However, socio- economic challenges persist following recent shocks, espe- 75.0 114.5 5 6 cially for the rural populations most affected by drought. Ad- GDP GDP per capita verse labor market trends have aggravated since the pan- current US$, billion current US$ demic, prompting the government to launch a roadmap on job creation focused on active labor market policies, rural 153.3 4024.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2013 (2017 PPPs). 3/ 2022. economies, women employment and private investment. 4/ 2023. 5/ 2024. 6/ 2024. coverage. The government has announced a job creation roadmap Key conditions and challenges that proposes more inclusive active labor market policies, mea- sures to preserve rural jobs, programs to lift barriers to women A drought has dragged overall growth, but non-agricultural GDP economic employment and incentives for private investment. To has accelerated. Among the factors that have driven this expansion boost employment opportunities and enhance overall living con- are the robust performance of export-oriented sectors and the re- ditions, further structural reforms would be needed to formalize covery of domestic demand. Hosting the 2025 Africa Cup of Na- firms and workers, stimulate the emergence of high-growth firms, tions and the 2030 World Cup could bolster the economy, which modernize labor regulations, and support women's employment. has been attracting growing interest from international investors. However, heightened trade uncertainty could prompt a reevalua- tion or delay of nearshoring investment plans. Recent developments Morocco is still grappling with significant socioeconomic challenges Real GDP growth decelerated to 3.2 percent in 2024 from 3.4 per- following the post-pandemic shocks. Inflation has eroded house- cent in 2023 due to a 4.6 percent contraction in the agricultural holds’ purchasing power, leading to depressed confidence indica- sector amid the sixth consecutive year of drought. Non-agricultural tors. The latest household survey reveals a partial reversal of pre- growth accelerated to 3.9 percent, driven by a revitalized industrial COVID poverty reduction trends and a rise in inequality since 2014. sector, particularly in phosphates and construction, which helped Long-term trends in the labor market show an increase in inactiv- offset the slowdown in services. Domestic demand is recovering ity and unemployment rates. The government is addressing these from the inflationary shock, with investment rising by 9.1 per- challenges. Minimum and civil servant wages have been adjust- cent—supported by public infrastructure and FDI—while private ed to mitigate the cost-of-living increase. Social protection systems consumption grew by 3.2 percent. The decline in inflation observed have been revamped with the introduction of mandatory health throughout 2024 has allowed Bank al-Maghrib to cut the policy rate insurance schemes and an enhanced cash transfer with broader by 50 basis points, to 2.5 percent. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 16 45 40000 40 35000 12 35 30000 8 30 25000 25 4 20000 20 15000 0 15 10 10000 -4 5000 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 0 2021 2022 2023 2024 2013 2015 2017 2019 2021 2023 2025 2027 Primary sector Secondary sector International poverty rate Lower middle-income pov. rate Tertiary sector Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: Haut Commissariat au Plan (HCP) and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 22 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Morocco’s external position remains strong. Despite fast-growing non-agricultural GDP is expected to decelerate to 3.2 percent imports resulting from the recovery of domestic demand, manu- in 2025 due to a base effect and to the impact of lower phos- facturing exports, tourism inflows, and remittances kept the cur- phate prices and heightened trade uncertainty on industrial rent account deficit at close to 1.2 percent of GDP in 2024, largely output and investment. financed with FDI. International reserves cover five months of im- ports, and Morocco retains good access to international financial As domestic demand continues to recover amidst moderate markets and multilateral credit. Revenue performance was strong price pressures, the current account deficit is expected to driven by tax reforms, anti-fraud measures, a tax amnesty, and widen to 2 percent of GDP in 2025, still below historical aver- State asset sales-and-lease back operations. This helped offset ages. The budget deficit is anticipated to decline to 3.9 percent the increased government expenditures resulting from a cost-of- of GDP as authorities moderate spending growth through mod- living salary adjustment and ongoing reforms and investments. est salary increases and ongoing LPG subsidy reform. Greater re- Consequently, the budget deficit is gradually returning to pre- liance on public-private partnerships (PPPs) for public investment pandemic levels, closing 2024 at 4.1 percent of GDP (down from in the face of high needs would help keep the debt ratio on a 4.5 percent in 2023). The debt-to-GDP ratio has stabilized at around downward trajectory. 70 percent of GDP. This forecast is subject to significant uncertainty and risks. Moroc- In 2024, Morocco's labor market exposed a contrast between the co's geographic position and comparatively advantageous market 2.5 percent growth in urban employment and a 1.9 percent decline access could help it cope with ongoing protectionist tensions. But in rural jobs. This trend penalizes women, whose activity rate uncertainty in trade policy could also lead to a higher-than-antici- has declined since the early 2000s. It also exacerbates the chal- pated investment slowdown. Challenging climatic conditions could lenges faced by the poor and vulnerable, which are predominant- continue impacting agriculture and rural households. Additional- ly rural and depend on irregular agricultural income. While pover- ly, spending pressures associated with ongoing reforms and infra- ty has accelerated its decline following recent shocks—reaching structure plans could strain the budget. 0.76 percent at the international line and dropping below 6 per- cent at the lower-middle income line—spatial disparities persist, GDP growth acceleration is expected to lead to a 20 percent de- with poverty remaining entrenched in low density areas distant cline in poverty by 2027, bringing it to 0.6 percent at the inter- from urban center. national poverty line and close to 5 percent at the lower-middle- income threshold. However, rising inequality could reduce the effectiveness of growth in lowering poverty. To sustain pover- Outlook ty reduction, targeted structural reforms promoting inclusive job creation, supporting SMEs, and completing social protection re- Real GDP growth is projected to slightly accelerate to 3.4 per- form should be pursued, along with stronger policies to reduce cent in 2025, driven by a partial recovery of agriculture. But territorial disparities. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.5 3.4 3.2 3.4 3.3 3.5 Private consumption 0.0 3.9 3.2 3.1 3.2 3.4 Government consumption 3.0 4.1 3.9 4.1 3.6 3.5 Gross fixed capital investment -3.9 1.9 9.1 6.0 4.0 4.3 Exports, goods and services 20.5 8.8 8.3 6.8 7.3 6.1 Imports, goods and services 9.5 7.4 11.1 7.4 6.7 5.8 Real GDP growth, at constant factor prices 1.6 3.2 3.2 3.4 3.3 3.5 Agriculture -11.8 1.6 -4.6 4.5 2.6 2.8 Industry -2.7 1.3 5.1 3.0 3.2 3.6 Services 6.8 4.4 3.5 3.4 3.5 3.6 Employment rate (% of working-age population, 15 years+) 39.9 39.7 39.7 39.9 40.0 40.1 Inflation (consumer price index) 6.6 6.1 0.9 2.0 1.8 1.5 Current account balance (% of GDP) -3.7 -0.6 -1.2 -2.0 -2.3 -2.5 Net foreign direct investment inflow (% of GDP) 1.2 0.2 0.7 0.7 0.9 1.2 Fiscal balance (% of GDP) -5.4 -4.5 -4.1 -3.9 -3.4 -3.3 Revenues (% of GDP) 28.7 28.1 30.3 30.7 29.6 28.3 Debt (% of GDP) 71.5 69.5 70.0 68.9 67.7 66.8 Primary balance (% of GDP) -4.1 -3.4 -2.8 -2.1 -1.9 -1.9 1,2 International poverty rate ($2.15 in 2017 PPP) 0.9 0.9 0.8 0.7 0.7 0.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 7.4 7.1 6.6 6.1 5.7 5.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 36.5 35.0 33.8 32.6 31.2 29.7 GHG emissions growth (mtCO2e) -0.2 0.9 1.9 2.1 2.9 3.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2013-ENCDM. Actual data: 2013. Nowcast: 2014-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2013) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 23 This outlook reflects information available as of April 10, 2025. 1 OMAN Population Poverty million 5.3 .. 2 3 Life expectancy at birth School enrollment Oman’s economic activity is expected to continue performing years primary (% gross) well with the phase out of OPEC+ oil production cuts, despite global economic uncertainty. Prudent fiscal management and 73.9 95.6 4 5 sustained efforts to accelerate diversification have shifted fis- GDP GDP per capita cal and external balances into surpluses since 2022. Using current US$, billion current US$ windfall savings to pay debt has put government finances on a more sustainable path. Downside risks to the outlook include 106.9 20238.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. oil market volatility, global slowdown, and climate events. slowing global growth and its impact on oil demand and on key sec- Key conditions and challenges tors such as the logistics, downward pressure on oil prices, which could impact the country’s fiscal and external sustainability. Oman has achieved significant economic progress in recent years. The expansion of nonhydrocarbon activities has helped support economic activity despite OPEC+ oil production cuts, notably in Recent developments construction, manufacturing, and services. Prudent fiscal discipline under Vision 2040, and higher non-hydrocarbon exports (minerals, Real GDP growth accelerated to 1.7 percent y/y in 2024, up from 1.2 metals, plastic, rubber and foodstuffs) have turned fiscal and exter- percent in the previous year, reflecting robust growth in non-oil activ- nal balances into surpluses since 2022. Using hydrocarbon wind- ities and gas production. The non-oil sector grew by 3.9 percent led by falls to pay debt has markedly reduced government debt, by al- a robust expansion in manufacturing, construction and resilient ser- most a half of its peak of nearly 68 percent of GDP in 2020. vices sectors. Within the hydrocarbon sector, oil activity contracted by 4.4 percent due to OPEC+ output cuts, resulting in a 3 percent Labor market reforms are ongoing, aiming to increase job oppor- contraction in the sector. Average headline inflation slowed down tunities for Omani nationals across all sectors, and improve female to 0.6 percent in 2024, from 1 percent in 2023, reflecting continued labor force participation. As such, Oman achieved 54 percent of contraction in transport prices and moderation in food inflation. its 2024 employment plan in the first six months, with more than 14,000 Omanis employed in the public and private sectors. Fiscal revenues edged by 4 percent y/y in the first ten months of 2024 (10M-24), mainly due to a surge in in revenues related to cap- Despite progress, the economy remains dependent on the hydro- ital and taxes on goods and services, up by 75 percent and 18 per- carbons sector, which contributes heavily to government revenue cent, respectively. On the other hand, public spending rose by 8 and export proceeds. Shifts in trade policy may have a limited di- percent during the same period, reflecting a 29 percent and 43 per- rect impact on the economy, while greater risks may arise from the cent y/y increase in investment expenditures (including oil and gas, FIGURE 1 / Real annual GDP growth FIGURE 2 / General government operations Percent change Percent of GDP 10 45 40 8 35 6 30 25 4 20 2 15 0 10 5 -2 0 -4 -5 2021 2022 2023 2024 2025e 2026f 2027f 2021 2022 2023 2024e 2025f 2026f Hydrocarbon GDP Non-Hydrocarbon GDP Real GDP Revenues Expenditures Budget balance Sources: Oman authorities, World Bank staff projections, and IMF projections. Sources: Oman authorities and World Bank staff projections. 24 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. manufacturing, tourism, and logistics). Accordingly, Oman’s over- Hydrocarbon growth is expected to reach 2.1 percent, while nonhy- all fiscal surplus narrowed to 1.3 percent of GDP in 10M-24, down drocarbon growth will remain strong at an estimated 3.4 percent, from 2 percent of GDP during the same period of 2023. Adding the driven by robust growth in construction, manufacturing and ser- transfers of funds to the total revenues and continued fiscal disci- vices activities. In the medium term (2026-2027), the full resump- pline, fiscal balance is expected to remain in surplus of 5.4 percent tion of oil production and steady growth in non-hydrocarbon activ- of GDP in 2024. Public debt stood at 35 percent of GDP in 2024, ities amid continued diversification efforts will drive the real GDP down from 37.5 percent of GDP by end 2023, underscoring the au- growth to 4 percent. Oman could face inflationary pressures in thorities’ commitment to containing public debt. the medium term on strong nonhydrocarbon growth and due to disrupted supply chains from rising trade uncertainty, however, The trade balance recorded a surplus of 18 percent of GDP (US$19.1 government subsidies and price caps will prevent a sharper rise billion) by end-December 2024, as refined oil products’ exports in inflation during the forecast period. surged by 185.5 percent. The current account surplus is estimated to remain broadly stable at 2.4 percent of GDP in 2024 on the back Lower oil prices following global trade uncertainty will pressure of solid growth in the non-hydrocarbon exports and higher refined government revenues, causing a lower fiscal surplus of an estimat- fuel exports from the new Duqm refinery, offsetting the impact of ed 2 percent of GDP in 2025. However, it is projected to gradually lower oil exports revenues. Gross foreign assets remain sizable at improve during 2026-27 as rising oil and gas production and con- US$18.4 billion by end-December 2024 (up by US$0.9 billion y/y). tinued fiscal adjustment would partially offset the impact of lower oil prices. Accordingly, public debt is expected to continue its down- Labor market indicators were generally stable in 2024, with an es- ward trajectory over the medium term. timated employment rate of 65.6 percent and an unemployment rate of 3.2 percent. According to the National Center for Statistical Similarly, the potential impact of trade uncertainty on oil export Information, the number of foreign workers declined by approxi- revenues, together with rising imports costs will reduce the current mately 1 percent in 2024 compared to 2023, while the number of account surplus to less than 1 percent of GDP in 2025. It is expect- Omani workers increased by about 0.5 percent. Women, particu- ed to rebound during 2026-27 driven by the anticipated increase in larly youth aged 15-24, continue to be the most vulnerable group oil production and solid increase in service exports on the back of in the labor market, facing the highest unemployment rate of 30.9 increased tourism and higher refined fuel exports. percent in 2024. The National Strategy for the Advancement of Omani Women aims to support women in the workforce. Employ- Key risks to the outlook arise from downward pressure on oil ment and unemployment rates are not expected to change signifi- prices, which could pose significant challenges to the fiscal and cantly in 2025, but some uncertainty remains. external accounts and disrupt the government’s reform program. Other risks are related to rising trade uncertainty. The immediate impact of trade uncertainty on Oman is expected to be limited, Outlook given that oil and refined products are exempted. Indirect risks arise from the slowdown in global oil demand, economic deceler- Notwithstanding rising trade uncertainty, Oman’s economic out- ation in China – a major trading partner–and steeper decline in oil look remains positive, with real GDP growth is expected to acceler- prices which could weigh on growth and debt dynamics. On the ate to 3.0 prompted by a rebound in oil production along with solid upside, additional fiscal and diversification measures could help growth in the nonhydrocarbon activity, and devoted reform efforts. Oman navigate such risks and uncertainty. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.0 1.2 1.7 3.0 3.7 4.0 Private consumption 7.1 5.4 3.3 2.8 2.7 2.8 Government consumption 0.9 4.0 2.0 2.3 2.5 2.4 Gross fixed capital investment 1.8 2.2 2.6 3.0 3.7 3.9 Exports, goods and services 9.1 1.9 1.5 3.0 4.3 4.7 Imports, goods and services 7.6 1.6 1.8 2.4 3.0 3.0 Real GDP growth, at constant factor prices 7.9 1.4 1.7 3.0 3.7 4.0 Agriculture 6.8 5.9 2.8 3.2 3.4 3.8 Industry 8.0 -0.2 2.6 3.0 3.6 3.8 Services 7.8 3.0 0.6 3.0 3.8 4.3 Employment rate (% of working-age population, 15 years+) 66.7 67.3 67.3 67.3 67.3 67.3 Inflation (consumer price index) 2.5 0.9 1.0 1.6 2.0 2.3 Current account balance (% of GDP) 4.0 2.5 2.4 0.9 1.2 1.4 Net foreign direct investment inflow (% of GDP) 4.5 2.2 4.6 4.8 4.9 5.0 Fiscal balance (% of GDP) 10.5 6.9 5.4 2.0 2.4 2.8 Revenues (% of GDP) 41.4 34.3 34.0 30.4 29.3 28.7 Debt (% of GDP) 41.7 37.5 35.2 35.0 34.2 33.1 Primary balance (% of GDP) 13.0 9.4 7.6 4.2 4.4 4.8 GHG emissions growth (mtCO2e) 6.3 4.6 3.2 4.5 0.5 0.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 25 This outlook reflects information available as of April 10, 2025. PALESTINIAN 1 2 Population Poverty million millions living on less than $6.85/day 5.3 1.1 TERRITORIES Life expectancy at birth years 3 School enrollment primary (% gross) 4 After 17 months of conflict, Gaza fell into its deepest eco- 73.4 92.1 5 6 nomic recession in 2024. In the West Bank, the knock-on GDP GDP per capita current US$, billion current US$ effects triggered significant job losses and a worsening fis- cal crisis for the Palestinian Authority (PA), amid an Israeli 13.7 2592.7 military operation in the Northern governorates. The out- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. look hinges on whether the ceasefire is reinstated, recon- 4/ 2023. 5/ 2024. 6/ 2024. struction prospects, aid levels, PA reforms and the level of Israeli restrictions in the West Bank. Key conditions and challenges Recent developments The economic potential of the Palestinian territories has been The overall Palestinian economy is estimated to have contracted heavily curtailed by movement and access restrictions relating to by 27 percent in 2024, marking its most severe downturn in over the Israeli occupation of the West Bank (the Government of Israel three decades. By early October 2024, damage to Gaza’s capi- states that these measures are in place to safeguard its security tal stock was estimated at US$29.9 billion. Economic activity in and that of its citizens), a near-blockade and, more recently, on- Gaza collapsed, with GDP contracting by 83 percent, except for going hostilities in Gaza. In addition, intermittent reform efforts minimal public services. In the West Bank, economic shocks were by the Palestinian Authority, limited government momentum, and triggered by tighter movement restrictions, loss of access to the the divide between the West Bank and Gaza further stifled the Israeli labor market, and a recent Israeli military operation in the economy. Real GDP growth averaged a mere 0.6 percent between Northern West Bank. This, compounded by increased Israeli de- 2017 and 2022. ductions from clearance revenues, payable to the PA, deepened the fiscal crisis and contributed to a 17 percent GDP contraction Current hostilities have exacerbated disparities in living standards in the West Bank. between the West Bank and Gaza. By the end of 2024, Gaza’s real income per capita fell below US$200, just 5 percent of the West In 2024, Gaza saw consumer price inflation (CPI) increase by 238 Bank’s. World Bank data show an 11 percent drop in the Palestin- percent year-on-year, driven largely by food and transport costs. ian Gross National Income (GNI) per capita in 2023, downgrading After the start of the ceasefire in last January, CPI declined for the territories from upper-middle income, prior to the conflict, to two months, dropping 33 percent in February 2025 compared lower-middle income status. to the previous month. The resumption of conflict in March, FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 40 45 4000 40 3500 20 35 3000 0 30 2500 25 2000 -20 20 1500 15 -40 1000 10 5 500 -60 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Palestinian Central Bureau of Statistics and World Bank estimates. Source: World Bank. Notes: See footnotes in table on the next page. 26 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. however, triggered a new major supply shock, causing renewed constrain economic activity in Gaza at least for the medium term, escalation in commodity prices. In the West Bank, inflation re- while growth in the West Bank will hinge largely on labor mobili- mained stable at 2.5 percent in 2024 reflecting continued trade ty both within the territories and into the Israeli labor market. If activity and subdued demand. reconstruction efforts start in 2026, economic recovery could gain traction. However, even with those assumptions, GDP is not antici- The PA’s fiscal crisis worsened in 2024 due to increased Israeli pated to return to pre-conflict levels in the immediate future, given deductions from clearance revenues, the natural decline in do- the estimated US$53.2 billion in recovery and reconstruction needs mestic revenues given the economic contraction and less than across Gaza. Consequently, the poverty rate is expected to remain needed aid. This forced the PA to significantly cut public salaries to high and climb to over 38 percent by end-2025—by far the highest an average of 60-70 percent, since October 2023. The fiscal deficit level in over two decades. The Palestinian economy is not expected surged to 9.5 percent of GDP in 2024, up from 3.8 percent in 2023, to be directly affected by the recent increase in global trade uncer- and was offset by domestic bank borrowing and arrears to public tainty. While some exposure may arise through indirect exports via employees, the private sector and the pension fund. Israel, for goods ultimately destined for the U.S. market, such ef- fects are currently assessed to be minimal. An already fragile labor market was severely impacted by the con- flict in Gaza and the economic contraction in the West Bank. By On the fiscal front, despite high uncertainty, the baseline assumes October 2024, unemployment in Gaza is estimated to have soared a return of clearance revenue transfers to pre-conflict levels by late to 79 percent. In the West Bank, the rate reached 29 percent by 2026, as well as a gradual uptick in domestic tax collection, re- end-2024, driven by the loss of commuters’ jobs in Israel and the flecting rebounding economic activity. These factors should drive settlements as well as job losses in the local economy. revenues up and - along with continued efforts by the PA on fis- cal consolidation- this should improve the deficit trajectory over In this context poverty has risen sharply. The national poverty rate the medium term. at the international line of US$6.85 a day in 2017 PPP stood at 22.1 percent in 2023 and is expected to have increased to 37.7 percent The outlook remains contingent on whether the ceasefire can be by the end of 2024. In Gaza, practically the whole population was reinstated, entrance of aid supplies to Gaza at scale and the res- estimated as living in poverty at the end of 2024 due to the conflict. olution of the clearance revenues dispute. Downside risks remain elevated, especially amid evolving regional and global geopolitical dynamics. The post-conflict governance framework for Gaza will Outlook be a critical determinant. The West Bank has in recent months experienced heightened and escalating tension and violence, with In 2025, the Palestinian economy is projected to grow by a mere any potential territorial changes, or threats thereof, posing risks to 1.6 percent under the baseline scenario. Fixed asset losses will economic stability, security, peace, and poverty dynamics. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.1 -4.6 -26.6 -1.6 4.0 16.0 Private consumption 17.7 -4.6 -32.5 3.6 4.0 16.6 Government consumption -9.3 -5.5 -25.0 -3.9 1.1 2.0 Gross fixed capital investment 12.2 -3.4 -30.7 1.9 3.0 13.0 Exports, goods and services 5.9 -6.0 -11.1 2.8 2.2 7.0 Imports, goods and services 19.7 -3.7 -31.1 6.0 2.0 8.0 Real GDP growth, at constant factor prices 1.4 -7.2 -26.6 -1.6 4.0 16.0 Agriculture -5.6 -11.0 -21.0 -11.1 2.5 8.0 Industry 3.5 -14.6 -32.2 -5.8 2.4 10.0 Services 1.6 -4.8 -25.7 0.3 4.5 18.0 Employment rate (% of working-age population, 15 years+) 34.0 30.4 19.6 29.3 32.4 34.0 Inflation (consumer price index) 3.7 5.9 53.7 5.0 3.0 3.0 Current account balance (% of GDP) -10.6 -16.2 -21.6 -18.5 -16.2 -14.2 Net foreign direct investment inflow (% of GDP) 2.0 0.6 -1.3 -0.3 0.3 1.0 Fiscal balance (% of GDP) -1.8 -3.8 -9.5 -9.5 -6.2 -6.2 Revenues (% of GDP) 27.2 26.2 28.7 29.2 31.7 31.7 Debt (% of GDP) 53.1 59.0 86.3 94.6 96.1 96.7 Primary balance (% of GDP) -1.1 -3.2 -8.5 -8.4 -5.1 -5.1 1,2 International poverty rate ($2.15 in 2017 PPP) .. 0.4 2.2 2.2 2.1 1.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 4.9 9.9 10.0 9.8 7.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 22.1 37.7 38.1 37.0 30.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2023-PECS. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2023) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 27 This outlook reflects information available as of April 10, 2025. 1 QATAR Population Poverty million 3.1 .. 2 3 Life expectancy at birth School enrollment Qatar’s economic growth remained subdued due to stagnant years primary (% gross) hydrocarbon output, while the non-hydrocarbon sector expanded under the Third National Development Strategy 81.6 95.0 4 5 (NDS3), driven by education, tourism, and manufacturing. Fis- GDP GDP per capita cal and external balances are set to remain in surplus, with fis- current US$, billion current US$ cal gains strengthening and external surpluses narrowing. Key risks include volatile energy prices, further escalation of geopo- 218.5 70854.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2022. 4/ 2024. 5/ 2024. litical tensions and a potential slowdown in China’s economy. heightened trade tensions may dampen investment flows and Key conditions and challenges weigh on diversification efforts in many countries, they could also redirect some investment activity toward Qatar, given its Qatar has made notable progress in diversifying its economy, relatively stable trade environment. Domestically, risks include with strong growth in education, infrastructure, and tourism, delays in implementation of NDS3 and an oversupply in the which has exceeded the country’s annual targets. The govern- real estate market. ment’s strategic investments in Artificial Intelligence (AI) and re- newable energy reflect its commitment to a knowledge-based economy. The newly launched education strategy (2024–2030) Recent developments aims at increasing tertiary enrollment, bridge skill gaps and en- hance workforce readiness will further strengthen the country Qatar’s economy grew modestly, with real GDP rising 2.6 per- in that area. cent year-on-year in 2024. Non-hydrocarbon activities expand- ed more rapidly (by 3.7 percent), driven by education (+14.4 Competition from the U.S. and Australia, along with ongoing percent), accommodation and food services (+8.7 percent), arts geopolitical risks, could affect LNG pricing and export revenues. and entertainment (+7.5 percent), and transportation (+5.4 per- In response, Qatar is securing long-term LNG contracts with cent). Qatar’s tourism sector exceeded its annual visitor ar- key partners, including China, Bangladesh, India, Taiwan, and rivals target of 4.79 million, achieving 5.08 million visitors—a Kuwait. The immediate impact of trade uncertainty on Qatar is strong step toward the official goal of 6 million visitors an- expected to be limited, given that oil and refined products are nually by 2030. Infrastructure upgrades, including smart city exempted—significant indirect risks remain. Amid rising glob- initiatives in Lusail, are creating opportunities for business ex- al trade uncertainty, potential global economic slowdown and pansion. Business sentiment improved, as the Purchasing Man- slower growth in China—a major trading partner—could damp- agers' Index (PMI) increased in February 2025 for the first time en LNG demand and further weigh on energy prices. While in 3 months and reach 51.9 in March. The hydrocarbon sector FIGURE 1 / Annual real GDP growth FIGURE 2 / Fiscal balance Percent, percentage points Percent of GDP 12 40 10 35 8 30 25 6 20 4 15 2 10 0 5 -2 0 2021 2022 2023 2024 2025 2026 2027 2021 2022 2023 2024 2025 2026 2027 Oil GDP growth Non-oil growth Real GDP growth Fiscal balance Revenue Expenditure Source: World Bank. Source: World Bank. 28 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. grew modestly by 0.6 percent in 2024, as production remained stable in anticipation of the North Field expansion. Despite sub- Outlook dued output, QatarEnergy secured new long-term contracts with China and Kuwait in January 2025, reinforcing its export market Despite rising trade uncertainties, real GDP growth is expected to stability. Inflation has decelerated to 1.1 percent in 2024, largely hold steady at 2.4 percent in 2025, before accelerating to 5.4 per- due to subsidies, price controls, weakening of rent and recre- cent in 2026 with the anticipated expansion of LNG capacity. Non- ation services prices and the strong riyal peg to the U.S. dollar. hydrocarbon growth is projected to stay strong at 3.3 percent, sup- ported by manufacturing, construction, and tourism, driven by ma- Fiscal pressures emerged as hydrocarbon revenue declined by jor events such as the Formula 1 Grand Prix and an expanding 18 percent in 2024, narrowing the fiscal surplus to 0.7 percent cruise industry. AI and smart infrastructure investments are ex- of GDP, down from 5.5 percent in 2023. On the external bal- pected to further enhance productivity and business efficiency. The ances, the current account surplus edged up to 17.4 percent of hydrocarbon sector is projected to grow by 0.9 percent in 2025, but GDP in 2024, supported by resilient tourism and transportation a significant boost is anticipated in 2026 as LNG output is set to services, even as the trade surplus moderated due to weaker surge by 40 percent to 110 mtpa. Inflation is expected to remain hydrocarbon exports. Remittance outflows decreased by 0.2 per- stable at 1.5 percent, anchored by fuel and food subsidies, though cent of GDP y/y 2024, supporting the secondary income balance. VAT implementation and uncertainty in trade policy pose upside Net FDIs decreased by 0.5 percent of GDP in the same period, risks. The rising trade uncertainties could elevate global production which worsened the financial account, contributing to the 0.4 costs and disrupt commodity markets, increasing the prices of im- percent of GDP decline in the overall balance of payments. Inter- ported goods, raw materials, and food products, which may con- national reserves held at the Qatar Central Bank’s rose gradually tribute to higher inflation in Qatar, but the currency peg to the USD to USD 70.2 billion in February 2025, up from USD 67.6 billion may play a stabilizing effect. in February 2024. This is complemented by the sizeable foreign assets held by Qatar Investment Authority (QIA), exceeding USD Fiscal and external balances are projected to remain in surplus, 526 billion at the end of 2024. despite continued moderation in hydrocarbon revenues amid de- clining oil prices. The fiscal surplus is projected to grow to 1.5 In 2023, the employment rate was 91 percent for non-Qatari percent of GDP in 2025, driven by LNG earnings and prudent fis- and 54.2 percent for Qatari populations. Men had significantly cal management. Additionally, the long-delayed implementation higher employment rates than women regardless of citizenship of value-added tax (VAT), anticipated later in 2025, can help miti- status. Labor market indicators remained stable in 2024, with an gate some reductions in hydrocarbon revenues from softer prices unemployment rate of 0.13 percent and an employment-to-pop- and potentially lower export volumes. The current account sur- ulation ratio of 87.4 percent (ILO). No significant changes in em- plus is expected to narrow but remain robust at 13.1 percent in ployment or unemployment rates are anticipated for 2025; how- 2025, reflecting lower energy export revenues together with ris- ever, there is considerable uncertainty due to increased global ing imports costs driven by the trade uncertainties, partially off- trade unpredictability. set by strong tourism exports. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.2 1.4 2.6 2.4 5.4 7.6 Private consumption 5.2 2.0 2.7 2.5 3.1 3.9 Government consumption 4.1 1.2 1.6 0.7 2.0 2.4 Gross fixed capital investment 3.1 1.4 1.9 2.1 2.4 3.2 Exports, goods and services 3.0 0.5 1.8 0.8 4.2 6.8 Imports, goods and services 6.0 3.2 3.7 3.2 3.2 3.4 Real GDP growth, at constant factor prices 4.2 1.4 2.6 2.4 5.4 7.6 Agriculture 7.7 5.4 2.5 2.4 2.9 2.9 Industry 1.7 0.3 1.5 1.8 6.0 9.0 Services 7.5 2.8 4.0 3.0 4.7 5.9 Employment rate (% of working-age population, 15 years+) 87.3 87.6 87.4 87.2 87.6 88.0 Inflation (consumer price index) 5.0 3.1 1.1 1.5 1.9 2.1 Current account balance (% of GDP) 26.8 16.9 17.4 13.1 15.5 16.2 Fiscal balance (% of GDP) 10.4 5.5 0.7 1.5 4.2 6.1 Revenues (% of GDP) 34.7 32.4 26.8 29.6 32.1 33.7 Debt (% of GDP) 42.6 44.2 40.2 38.8 38.8 34.8 Primary balance (% of GDP) 10.4 5.5 0.7 1.5 4.2 6.1 GHG emissions growth (mtCO2e) 3.4 0.8 1.7 2.4 4.8 6.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 29 This outlook reflects information available as of April 10, 2025. 1 SAUDI ARABIA Population Poverty million 33.9 .. 2 3 Life expectancy at birth School enrollment Growth is expected to recover with the phase out of OPEC+ oil years primary (% gross) production cuts, despite global economic uncertainty and downward pressure on oil prices. The performance of the non- 77.9 102.7 4 5 oil sector remains robust, driven by Saudi Arabia’s diversifica- GDP GDP per capita tion agenda. Fiscal pressures increased due to higher spend- current US$, billion current US$ ing. Inflation remains low and stable except for housing prices. Challenges include oil price and production uncertainty, 1085.4 32052.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2022. 4/ 2024. 5/ 2024. slowdown in global growth, and lack of productivity growth. Key conditions and challenges Recent developments Saudi Arabia faces risks from uncertain global market dynamics re- Economic growth partially recovered to 1.3 percent in 2024, up lated to oil production, demand and price. OPEC+ production deci- from -0.8 percent the previous year. This was driven by robust sions will have a large impact on economic recovery, external bal- non-oil sector growth (4.3 percent) and a slowing decline in the ances, and on the financing of the diversification plans. oil sector GDP (-4.5). During that period, non-oil growth was mainly driven by services (+4.1), namely the wholesale, restau- The country also faces risks from an uncertain global economic rant, and hotel sectors (+6.4) followed by finance, insurance, real context marked by rising protectionism, uncertainty and a resulting estate, and business services (+4.1). global economic slowdown. This could affect growth in major trad- ing partners and reduce demand for oil, particularly from Saudi Fiscal pressures increased throughout 2024, as the fiscal deficit in- Arabia’s largest trading partners, notably China. creased from 2 to 2.8 percent of GDP. This was due to the growth of expenditures (+1.5 percent of GDP) that outweighed that of rev- Finally, Saudi Arabia’s lack of productivity growth poses a challenge enues (+0.7). Other expenditures were the main driver of expen- to its diversification agenda. Despite efforts to develop non-oil sec- diture growth (+0.5), followed by the wage bill (+0.4) and subsidies tors, key indicators capturing the progress on economic diversi- (+0.3) that increased moderately. On the revenue side, oil revenues fication show limited progress. For instance, the share of non-oil slightly decreased by 0.3 percent of GDP, while non-oil revenues (private sector) activities in GDP increased from 47.5 percent to grew by 0.9 percent of GDP, mainly through higher collection of 51.4 percent of GDP between 2014 and 2024, while non-oil ex- VAT taxes (+0.5). ports remain weak (26.8 percent of total exports). Public finances have however benefitted from the introduction of non-oil revenue Inflation remained low throughout 2024, supported by tight mon- streams including VAT. etary policy and controlled prices of key consumption items. The FIGURE 1 / Annual real GDP growth FIGURE 2 / Central government operations Percent change Percent of GDP 20 35 30 15 25 10 20 5 15 0 10 -5 5 0 -10 2021 2022 2023 2024 2025f 2026f 2027f -5 Oil GDP Non-oil private GDP 2021 2022 2023e 2024f 2025f 2026f 2027f Government activities Real GDP Budget Balance Revenues Expenditures Sources: GASTAT Saudi Arabia and World Bank staff estimates. Sources: GASTAT Saudi Arabia and World Bank staff estimates. 30 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. average annual inflation rate of consumer prices was 1.7 per- September 2026, on an accelerated schedule from May 2025. cent in 2024. The housing sector remained the main contributor Resultantly, growth is forecasted to increase in the medium term, to inflation (8.8 percent), followed by modest contributions from driven by increased oil production from 8.9 million bpd in March restaurants and hotels (2.0). 2025, to 9.98 million bpd towards the end of 2026. With the full resumption of oil production (anticipated to further pick up in Pressures on the external accounts increased, with a declining 2027 to an average of 10.4 million bpd), oil GDP growth is ex- trade balance (-3.8 percent of GDP y/y in 2024). This was due to pected to accelerate starting 2026, forecasted to grow at 6.7 and lower oil exports (-2.6 percent of GDP), despite some improvement 6.1 percent respectively for 2026 and 2027. Meanwhile, the non- of the non-oil exports (+0.7), which was mostly driven by machin- oil sector is estimated to maintain steady yearly growth (3.6 per- ery, electrical appliances and equipment (+0.5) and transportation cent on average) between 2025 and 2027. However, rising global equipment (+0.3). Net FDI decreased by 0.5 percent of GDP y/y. Re- economic uncertainty remains an impediment to stronger non-oil mittance outflows increased by 0.5 percent of GDP y/y January-Sep- sector growth. tember 2024, adding pressures to the secondary income balance. The anticipated increase in oil production and improving ser- The labor market continues to show improving outcomes. The vices balance are also expected to strengthen the external sec- employment-to-population ratio improved in the third quarter of tor in 2025-2027. Additionally, service exports as a percentage 2024, up 0.6 percentage points from the previous year. Labor of GDP is projected to increase due to increased tourism and force participation among Saudis reached 51.5 percent, driven investments in the digital economy. Net foreign direct invest- mostly by increasing participation among Saudi women which re- ments are predicted to remain stable, at 1.1 percent of GDP mains, however, 30 percentage points below men. The Saudi un- throughout 2025-2027. employment rate stands at 7.8 percent as of the third quarter of 2024 down from 8.8 in 2023, inching closer to the Vision 2030 Fiscal pressures are anticipated to increase in the medium term objective of 7 percent. due to increased (capital) expenditures, in line with the budget projections. However, the planned increase in oil production in 2025-2027 is likely to keep the fiscal deficit within reasonable Outlook bounds, despite a projected increase from 2.3 percent of GDP in 2025 to 3.1 percent in 2027. On the monetary side, inflation As per the latest OPEC+ announcements, the voluntary oil is projected to remain stable in the coming years in line with production cuts will be phased out between April 2025 and recent trends. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.5 -0.8 1.3 2.8 4.5 4.6 Private consumption 4.9 5.3 3.3 2.9 3.0 3.1 Government consumption 9.3 5.7 0.7 4.9 3.5 3.5 Gross fixed capital investment 21.3 5.3 2.6 3.7 3.9 4.4 Exports, goods and services 20.5 -6.5 -5.5 4.0 8.0 7.6 Imports, goods and services 12.4 9.9 4.3 4.9 5.3 5.1 Real GDP growth, at constant factor prices 8.2 -1.4 1.1 3.0 4.5 4.6 Agriculture 4.0 4.1 2.0 2.0 2.0 2.0 Industry 12.4 -6.0 -3.4 1.3 4.5 4.0 Services 4.5 2.9 5.1 4.3 4.7 5.2 Employment rate (% of working-age population, 15 years+) 58.2 58.5 58.5 58.5 58.5 58.5 Inflation (consumer price index) 2.5 2.3 2.1 2.3 2.2 2.0 Current account balance (% of GDP) 13.7 3.2 2.5 3.9 5.7 7.8 Net foreign direct investment inflow (% of GDP) 2.4 2.1 1.1 1.1 1.1 1.1 Fiscal balance (% of GDP) 2.5 -2.0 -2.8 -2.3 -2.9 -3.1 Revenues (% of GDP) 30.5 30.3 30.9 30.4 30.6 30.8 Debt (% of GDP) 23.8 26.2 27.8 29.4 31.6 30.1 Primary balance (% of GDP) 3.2 -1.1 -1.9 -1.4 -2.0 -2.1 GHG emissions growth (mtCO2e) 3.7 4.1 -0.4 0.2 1.2 2.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 31 This outlook reflects information available as of April 10, 2025. SYRIAN ARAB 1 2 Population Poverty million millions living on less than $2.15/day 24.7 5.6 REPUBLIC Life expectancy at birth years 3 School enrollment primary (% gross) 4 In December 2024, Syrian rebels ousted President Bashar al- 72.3 79.6 5 6 Assad, sparking hopes of ending a 14-year conflict that dis- GDP GDP per capita current US$, billion current US$ placed over half the population and caused economic col- lapse and widespread poverty. Resolving the conflict could 21.4 869.0 drive recovery in Syria and the region through improved se- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. curity conditions, international engagement, eased sanc- 4/ 2023. 5/ 2024. 6/ 2024. tions, and reconstruction. Benefits are, however, contingent on political stability and effective policies. production and trafficking emerged as the economy’s most valu- Key conditions and challenges able sector. Once the eastern Mediterranean’s leading oil exporter, Syria has been forced to rely on imports due to severe drops in Syria’s civil war has been the deadliest conflict of this century. Be- domestic production and operational fields controlled by non-state tween 2011 and 2023, Uppsala Conflict Data Program recorded actors. Dependence on food imports has also intensified, with im- more than 409,000 battle-related deaths in Syria—more than any ports accounting for approximately one-third of cereal consump- other conflict of the past three decades. The conflict has had dev- tion between 2011 and 2024. astating economic consequences, with Gross Domestic Product (GDP) shrinking by 53 percent between 2010 and 2022, prompting the World Bank to classify Syria as a low-income country in 2018. Recent developments Nighttime light data suggests an even larger impact, with an 83 per- cent contraction in economic activity from 2010 to 2024. A coalition of rebel groups, led by Hayat Tahrir al-Sham, seized regime-held territories in a sweeping military operation in Decem- The conflict triggered one of the largest waves of displacement ber 2024, bringing 78 percent of Syria’s population and 60 percent since World War II. As of December 2024, approximately 5.5 million of economic activity under the control of the transitional govern- Syrian refugees reside in Turkey, Lebanon, Jordan, Iraq, and Egypt, ment. However, they control only 9 percent of oil production, with with an additional 1.2 million in Europe. the vast majority still under Syrian Democratic Forces (SDF) control. The combined impact of conflict and sanctions has profoundly re- After the regime's fall, conflict dynamics shifted. Clashes between shaped Syria’s economic structure. The tourism, energy, and man- transitional government forces and armed groups loyal to the for- ufacturing sectors have been hit particularly hard, while Captagon mer Assad regime fueled sectarian violence in Latakia and Tartous. FIGURE 1 / Inflation and exchange rate movements FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, y/y growth Poverty rate (%) Real GDP per capita (constant LCU) 350 80 32000 300 70 31000 250 60 30000 200 29000 50 28000 150 40 27000 100 30 26000 50 20 25000 0 10 24000 -50 0 23000 2010 2012 2014 2016 2018 2020 2022 2024 2022 2023 2024 2025 CPI inflation WFP min food basket prices International poverty rate Lower middle-income pov. rate CPI inflation: food SYP to US$ mkt exchange rate Real GDP pc Sources: Central Bureau of Statistics of Syria, World Food Program Market Price Watch Source: World Bank. Notes: See footnotes in table on the next page. Bulletin, and World Bank estimates. 32 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. In the north, Syrian National Army (SNA)-SDF clashes near the decline in 2024, due to persistent security instability, potential Tishreen Dam and Aleppo escalated amid Turkish airstrikes. In the prolonged disruptions in oil supply, and tight liquidity conditions. south, Israeli forces deployed beyond the occupied Golan Heights, With the economic contraction, extreme poverty is projected to sig- seizing territory in and beyond UN-supervised demilitarized areas. nificantly increase between 2024 and 2025. Israel also launched airstrikes on alleged military targets and smug- gling routes across Syria, raising conflict events involving Israel by Syria’s economic outlook is highly uncertain. Security chal- 40 percent compared to 2024. lenges remain acute, with armed groups retaining significant influence and the proliferation of weapons undermining cen- After a brief depreciation amid the chaos of the power shift, the tralized authority. Securing oil supply will be a major chal- Syrian pound appreciated by about 30 percent between the pre-es- lenge for the new government, as disrupted imports from calation level in late November 2024 and February 2025. The ap- Iran could drive up fuel prices and inflation. While some preciation has been partly driven by increased demand from re- sanctions on Syria’s energy, transportation, and financial sec- turning Syrians and expatriates. Syria's liquidity crisis persists as tors have been eased, frozen assets and restricted access tight restrictions—including weekly withdrawal limits, suspended to international banking continue to impede trade and in- e-payments, and delayed government salaries—continue to strain vestment. Further sanction relief could enhance energy sup- cash availability and worsen the pound’s scarcity. ply, foreign assistance, and humanitarian delivery. Addition- ally, reopened trade routes could facilitate the movement of After an initial spike, food prices have stabilized due to the removal goods and services and boost cross-border trade with Turkey and of military checkpoints and the influx of cheaper Turkish imported neighboring countries. goods. However, the price of subsidized bread has risen significant- ly as the new caretaker government has opted to reduce subsidies Return movements have increased since the fall of the Assad to curb the budget deficit. regime. Around 300,000—4.9 percent of the 6.3 million Syr- ian refugees abroad—have returned since the December 8 Access to humanitarian assistance in Syria remains critically low. regime change, according to the United Nations High Com- According to the UN Financial Tracking Service, US$1.5 billion in missioner for Refugees (UNHCR). In addition, out of the 7.4 funding has been allocated for humanitarian assistance for million Internally Displaced Persons (IDPs) in Syria, around 2024—less than half compared to the previous year. 885,000 have returned to their areas of origin since Novem- ber 27. While returnees pose a short-term challenge as they require assistance—key needs include food, water, and fu- Outlook el—their return could boost growth in the medium term by resuming their abandoned business activities and bringing Subject to extraordinarily high uncertainty, real GDP is project- much-needed skills and capital, increasing aggregate demand ed to contract by 1.0 percent in 2025, extending a 1.5 percent and labor supply. Recent history and projections 2022 2023 2024e 2025f Real GDP growth, at constant market prices 0.7 -1.2 -1.5 -1.0 Inflation (consumer price index) 63.7 127.8 58.1 19.7 Fiscal balance (% of GDP) -4.6 -2.5 -3.1 -2.2 1,2 International poverty rate ($2.15 in 2017 PPP) 24.8 27.7 30.4 32.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 67.0 70.1 72.8 74.8 Source: World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2022-HNAP. Actual data: 2022. Nowcast: 2023-2024. Forecasts are for 2025. 2/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 33 This outlook reflects information available as of April 10, 2025. 1 2 TUNISIA Population Poverty million millions living on less than $3.65/day 12.3 0.2 3 4 Life expectancy at birth School enrollment Tunisia’s economic outlook remains challenging, with eco- years primary (% gross) nomic growth at 1.4 percent and job creation stagnating in 2024, amid a drought and limited demand. With tighter ex- 74.3 103.5 5 6 ternal financing. the government has relied more on borrow- GDP GDP per capita ing from the Central Bank. Re-igniting growth and raising current US$, billion current US$ capital inflows are important near-term challenges. This will involve adopting a more ambitious fiscal policy, and 53.5 4354.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. strengthening state-owned enterprises and competition. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Tunisia faces challenging economic conditions and limited reform Tunisia’s growth has been modest and volatile since the sharp progress. As growth and private job creation stagnated after the COVID related contraction in 2020 (-9 percent). After a moderate 2011 revolution, the State stepped in as an employer of last resort rebound in 2021 (4.3 percent) and in 2022 (2.7 percent), the econo- and price stabilizer through subsidies. This caused a deterioration my stalled in 2023 (0 percent growth) and did not gain momentum of the fiscal and the current account deficits (CAD), and an increase in 2024 (+1.4 percent growth). As a result, real GDP in 2024 was 1 in public debt, which were accelerated by the COVID-19 pandemic. percent below its pre-Covid-19 level, four years after the pandemic. While both deficits have since reduced, also thanks to some fiscal The modest recovery is due to a drought, uncertain external financ- consolidation, the tighter external financing environment has ing conditions, the limited domestic and external demand, and reg- made their financing challenging. The authorities have relied more ulatory constraints that would need economic reforms. on domestic borrowing to finance the Budget in recent years, in- cluding Central Bank financing in 2020, 2024 and 2025. Tunisia’s external situation continued to improve in 2024. The growth of tourism revenues (+ 8.3 percent growth in 2023-24) and Tunisia’s growth prospects hinge on economic modernization ef- remittances (+ 11.2 percent) offset the 7.5 percent increase in mer- forts to address economic distortions and fiscal pressures. The pri- chandise trade deficit. As a result, the CAD declined from 2.3 per- ority actions could include making the tax system fairer and cent to 1.7 percent of GDP between 2023 and 2024. more efficient, improving the public administration and state- owned enterprises (SOEs) and reducing the barriers to the en- The pressure on public finances remains elevated. While the fiscal try of new firms. Progress in these reforms is critical to accel- deficit moderated in 2024, it continues to be higher than in the pre- erate the recovery and lay the foundation for a more sustain- Covid period (6.3 percent of GDP in 2024, up from 2.9 percent of able economic growth. GDP in 2019). This contributes to the challenges in financing the FIGURE 1 / Real GDP: Actual, forecast and pre-COVID-19 trend FIGURE 2 / Actual and projected poverty rates and real GDP per capita Millions of real TND (2015 prices) Poverty rate (%) Real GDP per capita (constant LCU) 110,000 35 8400 30 8200 105,000 Pre-COVID-19 8000 25 trend 100,000 7800 20 7600 95,000 15 7400 SM25 10 90,000 7200 5 7000 85,000 0 6800 2010 2012 2014 2016 2018 2020 2022 2024 2026 80,000 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 2024 Upper middle-income pov. rate Real GDP pc Sources: World Bank estimates and National Institute of Statistics. Source: World Bank. Notes: See footnotes in table on the next page. 34 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. public debt, which between 2019 and 2024 increased from 67.8 rainfall and some impact of trade uncertainty particularly on man- to 81.2 percent of GDP (excluding government guarantees and ufacturing. Growth is eventually expected to stabilize at around SOE debts). Gross financing needs also increased from 7.9 per- 1.6-1.7 percent in 2026-27. cent of GDP in 2019 to 16.0 percent in 2024, with 70 percent due to debt amortization. The budget deficit is expected to decline slightly to 5.8 per cent of GDP in 2025 (compared to 6.3 percent in 2024) as the growth of Tunisia’s access to international financing remains limited and for- subsidies and the wage bill remains subdued and tax revenues in- eign direct investment (FDI)—while increasing by 4.4 percent in crease moderately. Gross financing needs are expected to decline 2024—cover about a fifth of the CAD and public external debt reim- slightly to 15.6 percent of GDP in 2025 (from 16.0 percent in 2024) bursement combined. As a result, the authorities have increasingly mainly due to the reduction in the fiscal deficit. relied on domestic sources to cover the external financing needs. These include a TND 7 billion (US$2.3 billion) loan from the Central The CAD is projected to increase slightly to 1.8 percent of Bank in both 2024 and 2025. GDP in 2025 with a widening of the trade deficit also due to the trade uncertainty, partly compensated by the moder- Inflation continued to moderate since the peaks of February 2023, ate growth in tourism and the decline in oil prices. With FDI declining from 10.4 percent to 5.7 percent in February 2025. The projected to increase but from a low base and minimal portfo- decline appears to be driven by lower global prices, reduced do- lio investments, borrowing would remain an important source of mestic demand and a relatively high policy rate. However, inflation external financing. remains slightly above both the pre-Covid average (5.3 percent), and food inflation is higher (7.1 percent), which presents a particu- The 2025-27 growth forecast is subject to significant downside lar challenge for lower income households. risks. In the near term, rising trade uncertainty, limited external fi- nancing conditions and a deterioration of drought conditions could With modest economic growth, the unemployment rate increased raise growth and macroeconomic stability challenges for Tunisia. slightly to 16 percent in Q3 2024 from 15.8 percent a year before. Medium-term prospects would improve markedly if Tunisia took The labor force participation rate continues to hover around 1.2 steps toward strengthening fiscal policies, modernizing SOEs and percentage point below the pre-Covid rate, which suggests a higher fostering greater competition. number of discouraged workers. Poverty at the Lower Middle Income Poverty Line (US$3.65/person/ day line in 2017 PPP term) is expected to remain stable at close Outlook to 2 percent until 2027. The share of individuals who are poor and vulnerable at the Upper-Middle Income Poverty Line (US$6.85/per- After the limited growth in 2023-2024, the economy is expected to son/day in 2017 PPP) is projected to steadily decrease from 15.6 in grow by 1.9 percent in 2025, assuming continued improvement in 2023 to 14.3 percent by 2027. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 2.7 0.0 1.4 1.9 1.6 1.7 Private consumption 2.0 -1.9 4.1 4.4 4.1 4.2 Government consumption 1.2 -2.4 -1.1 4.7 4.4 3.1 Gross fixed capital investment 2.1 -7.5 0.8 1.3 0.9 1.3 Exports, goods and services 17.3 10.5 -0.7 1.5 1.5 1.6 Imports, goods and services 11.6 5.6 4.3 5.9 5.7 5.6 Real GDP growth, at constant factor prices 2.6 -0.1 1.2 1.9 1.6 1.7 Agriculture 1.9 -16.1 8.3 8.3 0.9 0.6 Industry 0.7 -1.0 -2.5 -1.7 -0.8 -0.6 Services 3.4 2.7 1.6 2.3 2.6 2.6 Employment rate (% of working-age population, 15 years+) 38.8 38.5 38.8 39.0 39.0 39.0 Inflation (consumer price index) 8.3 9.3 7.0 5.5 5.0 5.0 Current account balance (% of GDP) -8.8 -2.3 -1.7 -1.8 -2.0 -2.4 Net foreign direct investment inflow (% of GDP) -1.3 -1.5 -1.4 -1.5 -1.5 -1.6 Fiscal balance (% of GDP) -6.9 -7.3 -6.2 -5.8 -5.6 -5.5 Revenues (% of GDP) 29.6 29.1 28.4 28.0 28.0 27.8 Debt (% of GDP) 82.3 84.6 81.2 82.2 83.1 85.5 Primary balance (% of GDP) -3.6 -3.4 -2.4 -1.8 -1.5 -1.1 1,2 International poverty rate ($2.15 in 2017 PPP) 0.2 0.2 0.2 0.2 0.2 0.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.9 1.9 1.9 1.8 1.8 1.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.4 15.6 15.3 14.9 14.6 14.3 GHG emissions growth (mtCO2e) 0.3 -0.2 0.4 1.9 1.9 1.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-NSHBCSL. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2021) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 35 This outlook reflects information available as of April 10, 2025. UNITED ARAB 1 Population Poverty million 10.9 .. EMIRATES Life expectancy at birth years 2 School enrollment primary (% gross) 3 The UAE’s economy is reaping the benefits of its diversifica- 79.2 106.3 4 5 tion, prudent macroeconomic policies and economic trans- GDP GDP per capita current US$, billion current US$ formation. While hydrocarbons remain critical, the expand- ing non-oil sector drives sustainable growth. Despite OPEC+ 543.1 50033.1 adjustments, global trade headwinds and associated uncer- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. tainty, economic growth remains steady, with modest im- provements expected in 2025. Fiscal buffers, forward-look- ing governance, and investments ensure long-term stability. space; and (3) higher interest rates given the UAE currency peg to Key conditions and challenges the USD. Further risks may stem from geopolitical instability partic- ularly in the Red Sea, and trade disruptions and its implications on The United Arab Emirates (UAE) economic growth remains robust, key sectors including transport and logistics. driven by strong domestic activity and structural transformation. While hydrocarbons remain critical, economic diversification is ac- celerating to enhance resilience and reduce fiscal risks. The non-oil Recent developments sector is expanding, supported by strategic investments. As part of OPEC+, the UAE extended its voluntary oil production cuts through The UAE maintained robust economic growth in 2024, driven by March 2025, with a gradual phase-out until September 2026, to strong domestic demand, structural reforms, and targeted invest- support market stability and fiscal sustainability. A recent increase ments. In 9M 2024 the real GDP expanded 3.7 percent year-on- in global trade policy uncertainty has introduced new headwinds to year, supported by a 4.5 percent expansion in the non-oil sector. the external environment. Simultaneously, OPEC+’s decision to ac- Growth was broad-based, led by a rise in financial services, trans- celerate the resumption of oil production—with the UAE’s output portation, and construction and real estate. Growing FDI inflows rising to 3,015 kbd in May—could potentially trigger additional and improvements in governance indicators further strengthened downward pressure on oil prices. The direct impact through trade economic competitiveness. The oil sector grew 1.5 percent during channels is expected to remain limited, reflecting the relatively low the same period, remaining a key stabilizing force despite a 2.5 per- exposure of UAE exports to the most affected markets. Howev- cent voluntary reduction in crude oil output under OPEC+ agree- er, indirect spillovers can be significant, notably through (1) glob- ments. Inflation moderated to 2.3 percent, with stable tradable al trade volumes, investment sentiment, and slower global growth; goods prices offsetting housing and utilities cost increases. The (2) lower oil prices following OPEC+ decisions and tighter fiscal Central Bank maintained a balanced monetary stance, ensuring FIGURE 1 / Annual real GDP growth FIGURE 2 / Public finances Percent change Percent of GDP 15 30 25 10 20 5 15 10 0 5 -5 0 2021 2022 2023 2024 2025 2026 2021 2022 2023 2024 2025 2026 Oil GDP Non-oil GDP GDP Fiscal Balance Revenue Expenditure Sources: UAE authorities, IMF WEO, and World Bank staff estimates. Sources: UAE authorities, IMF WEO, and World Bank staff estimates. 36 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. liquidity conditions remained supportive of growth while contain- support economic diversification and competitiveness. However, ing inflationary pressures. While hydrocarbons remain the main key sectors such as logistics may be impacted by ongoing trade source of government revenue, the UAE continues to accelerate uncertainties and disruptions. The UAE is expected to continue economic diversification to mitigate fiscal vulnerabilities. Robust advancing its energy transition strategy, targeting a threefold in- fiscal buffers and countercyclical policies contribute to macroeco- crease in renewable capacity to 14 GW by 2030. Strategic invest- nomic stability. The fiscal surplus is estimated at 4.6 percent of ments in clean energy and efficiency technologies will reinforce GDP in 2024, supported by robust fiscal stance and countercyclical economic resilience and long-term sustainability, in line with the fiscal policies. Targeted public investments in AI, digital infrastruc- UAE’s Energy Strategy 2050 and net-zero targets. ture, and advanced are accelerating innovation-driven growth and expanding the knowledge economy. The UAE’s external position The fiscal surplus is projected to narrow to 4.2 percent of GDP in remains strong. The current account surplus is estimated at 7.9 2025 while remaining in surplus. However, declining oil prices, dri- percent of GDP in 2024, reflecting strong goods and services ex- ven by both supply expansion and global slowdown, are expected ports. Non-oil exports expanded by 33 percent during 9M 2024 to tighten fiscal space, though sovereign buffers offer near-term re- compared to the same period in previous year, driven by increase silience. Medium term fiscal stability is anticipated to be reinforced in gold, jewelry and tobacco products. The UAE's ongoing expan- by ongoing tax policy reforms. The Domestic Minimum Top-up Tax, sion of Comprehensive Economic Partnership Agreements (CEPAs) effective January 2025, is expected to enhance fiscal sustainability with countries across Eastern Europe, Asia, Oceania, and beyond and strengthen international tax alignment, though its implemen- has played a pivotal role in enhancing trade volumes. In 2024, the tation may require corporate adjustments and compliance adap- UAE’s tourism sector recorded steady growth, contributing to the tations. The current account surplus is projected at 6.2 percent in country’s external sector by supporting service exports, increasing 2025 and expand to 6.4 in 2026 as oil prices stabilize and imports foreign exchange inflows, and strengthening the current account increase, supported by substantial reserves and sovereign wealth balance. As of November 2024, net international reserves at the buffers. The economic outlook remains subject to external risks, central bank of UAE reached USD223 billion. including oil price volatility, geopolitical tensions, and global trade disruptions. Elevated uncertainty, weaker trade, and tighter global financial conditions may weigh on the near-term outlook. However, Outlook strong fiscal buffers, targeted investments, and structural reforms are expected to support medium term stability. The UAE’s GDP is projected to grow by 4.6 percent in 2025, and to remain broadly stable around that range in medium-term. From Employment’s growth remains robust in 2025 at 3.3 percent y-o-y, 2025 onward, oil GDP is expected to expand, reflecting the phasing a slight decline relative to 2023 (ILO estimates). The employment- out of OPEC+ decisions. Gradual resumption of oil production be- to-population ratio is projected to reach 76.2 percent on average in tween May 2025 and September 2026, is expected to support oil- 2025, with a stronger growth estimated among women. The unem- GDP growth despite downward pressure on global oil prices. The ployment rate is projected to remain stable at about 2.1 percent in non-oil sector is expected to remain a key contributor to growth, 2025, though the rate is estimated to remain twice as high among with projected expansion of 4.9 percent in 2025, supported by women. At 6.2 percent, unemployment rates remain substantially growth in tourism, construction, transportation, and financial ser- higher among young adults ages 15–24. The gap is especially wide vices. Ongoing business climate reforms, infrastructure invest- among women, with projected rates of 11.9 percent among youth ments, and governance enhancements are expected to further relative to 4.5 percent among women ages 15+ for 2024. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.6 2.9 3.9 4.6 4.9 4.9 Private consumption 9.0 5.1 4.6 3.5 3.1 3.0 Government consumption 3.5 3.0 3.5 3.8 3.8 3.7 Gross fixed capital investment 6.0 5.9 4.2 2.9 3.1 3.3 Exports, goods and services 8.1 3.3 5.0 5.9 6.1 5.9 Imports, goods and services 7.4 5.3 5.6 5.0 4.8 4.8 Real GDP growth, at constant factor prices 7.6 2.9 3.9 4.6 4.9 4.9 Agriculture 3.4 3.5 2.9 2.7 2.5 2.5 Industry 8.8 1.2 2.5 1.3 2.0 1.7 Services 6.5 4.5 5.2 7.6 7.3 7.5 Employment rate (% of working-age population, 15 years+) 79.9 80.2 80.4 80.3 80.2 80.2 Inflation (consumer price index) 4.8 1.6 2.3 2.2 2.1 2.1 Current account balance (% of GDP) 11.9 9.7 8.2 6.2 6.4 6.8 1 Fiscal balance (% of GDP) 3.6 3.6 4.6 4.2 4.5 4.6 Revenues (% of GDP) 27.0 27.0 27.4 26.4 25.7 25.0 Debt (% of GDP) 31.5 29.8 29.8 30.7 30.2 29.7 Primary balance (% of GDP) 3.8 3.9 4.9 4.4 4.8 4.9 GHG emissions growth (mtCO2e) 2.9 -1.3 -1.0 -1.2 -0.1 0.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Consolidated fiscal balance. Macro Poverty Outlook / April 2025 37 This outlook reflects information available as of April 10, 2025. REPUBLIC OF 1 Population Poverty million 40.6 .. YEMEN Life expectancy at birth years 2 School enrollment primary (% gross) 3 Yemen faces mounting external risks amid persistent do- 63.7 83.9 4 5 mestic tensions, including the Houthis ongoing blockade of GDP GDP per capita current US$, billion current US$ IRG oil exports. The U.S. designation of the Houthis as a For- eign Terrorist Organization threatens banking and financial 17.6 433.2 flows, while aid cuts could worsen Yemen’s already dire eco- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2016. 4/ 2024. 5/ 2024. nomic and social conditions. Two-thirds of the population have inadequate food consumption, and poverty is wide- spread. Against this backdrop, the outlook remains bleak. Conflict, climate hazards, and food insecurity compound humani- Key conditions and challenges tarian needs. Nearly half of Yemenis face extreme heat, drought, or flooding, while 64 percent had inadequate food consumption by Yemen’s prolonged conflict has driven a severe humanitarian and 2024 (WFP). Moreover, a quarter suffer from the compounding ef- economic crisis. Since 2015, real GDP per capita has shrunk by fects of food insecurity and exposure to climate hazards, mostly 58 percent, and Yemen now ranks 186th out of 193 countries on in conflict-affected districts. Rising food insecurity is also linked to the Human Development Index (2024). The country remains high- worsening health conditions and increasing mental health disor- ly fragmented, with two distinct economic zones governed by sep- ders, reinforcing a cycle of poverty and human capital loss. With- arate institutions. Houthi-controlled areas are home to 70 percent out conflict resolution, meaningful reconstruction, and reforms, of the population, while IRG-controlled regions hold the country’s Yemen’s crisis will only deepen. oil and gas resources. Structural challenges further constrain economic recovery. Reviv- Recent developments ing the oil sector necessitates sustained peace, significant invest- ment, and technical support, especially considering the deteriora- In 2024, Yemen’s economy has been severely impacted by the tion of Yemen’s aging oil fields. Meanwhile, the non-oil sector con- ongoing Houthi blockade on IRG oil exports and a deteriorating tinues to struggle under conflict conditions, grappling with supply economic environment. Real GDP is estimated to have contract- disruptions, double taxation, corruption, market distortions, and ed by 1.5 percent, following a 2.0 decline in 2023. Oil-sector ac- weak institutions. Even remittances and aid, which are crucial for tivity stagnated after a sharp 60 percent drop in 2023, while the mitigating social hardship, remain vulnerable to disruptions caused non-oil sector continues to struggle with economic fragmenta- by the ongoing conflict. tion, exchange rate depreciation in IRG-controlled areas, liquidity FIGURE 1 / Real GDP per capita FIGURE 2 / Exchange rate trend: Sana’a and Aden Base 100 in 2014 YER per US$1 100 2100 1900 90 1700 80 1500 1300 70 1100 900 60 700 50 500 40 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Aden Sana'a Source: World Bank staff calculations. Sources: Telegram Exchange Market Group and World Bank staff calculations. 38 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. shortages in Houthi-controlled areas, and heavy reliance on im- GDP. Consequently, the YER depreciated from 1,540 per US dol- ports. In principle, currency depreciation should boost exports and lar at the end of 2023 to 2,065 by the end 2024 driving con- curb imports by making locally produced goods more competitive. sumer prices up by over 30 percent and further straining house- However, in Yemen’s FCV context, self-correcting market mecha- hold purchasing power. nisms are absent, as domestic firms remain severely constrained by the conflict, limiting their capacity to expand production. As a result, rather than enhancing competitiveness, the depreciation of Outlook the Aden exchange rate further exacerbates economic challenges. The economic outlook for 2025 remains bleak, with persistent do- Regional instability has further worsened the economic conditions. mestic challenges compounded by escalating external threats. In Houthi involvement in the Red Sea led to approximately 477 violent IRG-controlled areas, the ongoing Houthi oil exports blockade, cou- incidents, including 201 attacks on commercial ships (ACLED Dash- pled with the absence of a clear path to peace and security, will board 2025). Consequently, traffic through the Suez Canal and Bab keep public finances and external accounts under significant strain. El-Mandeb Strait—critical trade routes carrying 30 percent of glob- Inflation is expected to persist, driven by currency depreciation in al container shipping—plummeted by three-fourths, while the al- the Aden market, which will erode purchasing power and damp- ternative Cape of Good Hope route saw a 50 percent increase in en consumption. At the same time, worsening fuel shortages have traffic, driving up freight and insurance costs. exacerbated electricity blackouts, disrupting essential services and constraining production capacity. In Houthi-controlled areas, acute Additionally, tensions between the Houthis and the IRG over con- liquidity shortages persist, with restrictions on cash withdrawals trol of the banking sector in the first half of 2024 further height- and limited access to funds stifling local consumption and business ened economic uncertainty. In April, CBY-Aden issued a mandate activity. The divide between the two economic zones is widening, requiring banks in Sana’a to relocate to Aden or face disconnection with diverging monetary policies further exacerbating the gap be- from SWIFT, exacerbating hostilities between the two parties. The tween the Aden and Sana’a exchange rates (Yemen Economic Mon- situation remained tense until July 23, when both sides agreed to itor, Fall 2024). Simultaneously, Yemen faces increasing external de-escalate by reversing recent measures against banks and ex- threats. The U.S. decision to designate the Houthis as a FTO could panding Yemenia Airways’ international flights. This agreement fol- have far-reaching impacts for the banking sector, imports and fi- lowed a warning from the World Food Program about an imminent nancial flows, including remittances and ODA. Additionally, cuts in liquidity crisis and rising hunger in Houthi-controlled areas. U.S. foreign aid could worsen Yemen’s already dire social condi- tions. In 2023, U.S. official aid to Yemen totaled US$820 million, The IRG’s fiscal revenues, excluding grants, declined sharply in nearly one-fifth of the country’s total ODA. Yemen remains highly 2024, though donor support and spending cuts helped mitigate dependent on aid, which constitutes around 25 percent of its an- the fiscal deficit. According to the Ministry of Finance in Aden and nual GDP. As a result of these compounded challenges, real GDP is World Bank calculations, non-grant revenues fell to 2.5 percent of projected to contract by 1.5 percent in 2025. GDP, from 4.6 percent of GDP in 2023. However, Saudi budget sup- port—totaling US$750 million in 2024 —helped stabilize public fi- Downside risks remain significant, potentially further destabilizing nances. Additionally, reductions in spending on current transfers, Yemen’s economy. The risk of renewed Houthi attacks persists, po- along with lower goods and services expenditures, helped narrow tentially driving up import costs through supply disruptions, high- the fiscal deficit from 7.2 percent of GDP in 2023 to approximately er shipping expenses and insurance rates. The uncertain impact of 2.5 percent in 2024. FTO sanctions could further disrupt humanitarian aid, essential im- ports, and remittances—key lifelines for Yemenis. Banking sector Nevertheless, external imbalances intensified, leading to a depre- tensions, as seen in 2024, could resurface, adding further strain. ciation of the Yemeni Rial in the Aden market. The continued Ultimately, Yemen’s future depends on securing peace, rebuilding, blockade on IRG oil exports, combined with heavy reliance on and implementing critical reforms to strengthen state institutions imports, pushed the current account deficit to 18.0 percent of and restore business confidence. Recent history and projections 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.5 -2.0 -1.5 -1.5 0.5 1 Inflation (consumper price index) 29.5 0.9 30.4 20.2 16.1 Current account balance (% of GDP) -13.5 -16.0 -18.0 -11.7 -11.4 Net foreign direct investment inflow (% of GDP) 0.9 5.4 -0.1 0.1 0.1 Fiscal balance (% of GDP) -2.7 -6.8 -2.5 -3.8 -4.6 Revenues (% of GDP) 9.5 6.7 6.4 5.9 7.1 Debt (% of GDP) 77.9 112.4 94.8 99.3 92.1 Primary balance (% of GDP) -1.7 -4.9 -0.9 -2.3 -3.3 GHG emissions growth (mtCO2e) -1.2 -2.7 -1.7 -0.6 1.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Inflation rates refer to end-of-period figures. Macro Poverty Outlook / April 2025 39 MPO