Double-digit food inflation leads to slower growth across MENA regions

11 Apr 2023 --- Increasing inflation within the economies of the Middle East and North Africa (MENA) is causing slower economic growth and commensurate food insecurity, according to a report by the World Bank. The report forecasts MENA’s GDP will slow to 3.0% in 2023, down from 5.8% in 2022.

According to the report, the average year-on-year food inflation across the 16 MENA economies between March and December 2022 was 29%.

In that same period, headline inflation averaged 19.4% year-on-year. Comparatively, headline inflation rose 14.8% between October 2021 and February 2022. The report notes that across 2022, “Prices soared because of supply and demand factors, including the food and energy market disruptions that followed the war in Ukraine.”

Of the four MENA subgroups covered by the report – developing oil importers, developing oil exporters, conflict countries and the GCC, “inflation accounts for 24% to 33% of 2023’s forecasted food insecurity.” 

The World Bank has reported that worsening food crises in the Middle East and Northern Africa could have dire impacts lasting for generations.Feeling the squeeze
This drop and the food insecurity it creates will have “a devastating effect on poor families,” according to Ferid Belhaj, World Bank Vice President for the MENA region. “The long-term implications of food insecurity will be felt for generations and sadly limit prospects for many young people,” he continues. 

“The human and economic cost of inaction is immense and bold policies are needed in a region where young people make up more than half of the population.” 

The report, titled “Altered Destinies: The Long-Term Effects of Rising Prices and Food Insecurity in the Middle East and North Africa,” flags that the increase in food prices from March to June of 2022 may have “increased the risk of childhood stunting by 17%-24% in developing countries in MENA,” meaning potentially 200,000 to 285,000 newborns are at risk of stunting. 

“The report estimates that close to one out of five people living in developing countries in MENA is likely to be food insecure this year and that almost eight million children under five years of age are among those who will be hungry,” says Roberta Gatti, World Bank Chief Economist for the MENA region. “Food price inflation, even temporary, can cause long-term and often irreversible damage.” 

The report also notes that half (eight out of sixteen) of the countries in MENA suffer from “double-digit food price inflation or higher,” which affects the poorest households the most, as they must spend more of their limited budgets on food.   

If these households cannot do so, they will experience the devastating effects of malnutrition. In children, this leads to poorer health and lowered income. 

“The research offers clear evidence that inadequate nutrition in utero and early childhood has the potential to disrupt the destinies of children, setting them on paths to limited prosperity,” adds Gatti.

The report continues to note that within MENA, Syria and Yemen are classified as hunger hotspots based on the Integrated Food Security Phase Classification. Earlier this year, the WEF Global Risks Report of 2023 flagged that Tunisia, Ghana, Lebanon and Egypt are in simultaneous food and debt crises. 

Egypt, one of the world’s largest wheat importers, has set its sights on securing its wheat supply by relaxing its wheat import rules to allow higher moisture levels in wheat and facilitate imports from countries like Poland.

Potential solutionsAccording to the report, policy changes and food systems that can resist change may prove effective solutions.
The report notes the need for effective policies to combat food inflation, saying, “Policymakers can address food insecurity in several ways – using social protection measures such as cash and in-kind transfers, childcare and maternity leave policies, and improving maternal education. Data transparency is a first step.”

While flagging that the “Challenges are enormous,” the report suggests that an effective solution to rising food insecurity would be enhancing food system resilience by “building efficiency in supply chains and improving their response to and recovery from climate and market shocks.” 

This could be achieved by focusing on climate-smart agriculture and early warning systems, facilitating access to finance and export and input markets and promoting better risk transfer and coping mechanisms such as insurance or food reserves.

The UN has called for action against food insecurity and global starvation as economic crises and global warming exacerbate already stressed food systems.

By James Davies