DUBAI: The IMF on Monday (Jul 13) again sharply lowered its Middle East and North Africa economic forecast, to its lowest level in 50 years, over the “twin shock” of the coronavirus pandemic and low oil prices.
The region’s economy will contract by 5.7 per cent this year, and shrink by as much as 13 per cent in countries torn by conflict, the Washington-based International Monetary Fund warned.
The economic malaise will see poverty and unemployment rise, stoking social unrest, and send budget deficits and public debt surging, it said.
In its regional economic outlook update, the IMF projected the economies of the Middle East and North Africa to contract by 5.7 per cent this year, 2.4 percentage points lower than its April forecast.
The projection is the lowest in over 50 years, according to World Bank data, and comes after the region posted modest growth last year.
The battered energy-based economies of the Gulf Cooperation Council (GCC) states are forecast to shrink by a hefty 7.1 per cent, 4.4 percentage points lower than April.
“The region has been facing a crisis like no other – a twin shock that affected the normal functions of their economies during the confinement measures,” Jihad Azour, director of IMF Middle East and Central Asia Department, told AFP.
Middle East countries applied some of the most stringent lockdowns and measures against the coronavirus, halting most economic activities.
Oil prices plunged by about two-thirds in a freefall as the global economy ground down to prevent the spread of the coronavirus. They have partially recovered to around US$40 a barrel.
The region’s oil-exporting countries are expected to lose around US$270 billion of energy revenues, “which is a big drop,” Azour said.
The IMF said that the region’s hardest-hit countries will be those that are “fragile and in conflict situations,” with their economies forecast to contract by as much as 13 per cent.
GDP per capita in those unstable countries is expected to plummet from US$2,900 in 2018-2019 to just US$2,000 this year.
“This is a dramatic downturn that will aggravate existing economic and humanitarian challenges and raise already high poverty levels,” the report said.
“Social unrest could be rekindled as lockdown measures are lifted.”
Azour warned that job losses, together with worsening poverty and inequality, could create stability challenges for governments in the region.
“(Job losses) will come on top of an already high level of unemployment, especially at youth level,” he said.
The IMF said that large and growing deficits are expected to push public debt levels to 95 per cent of GDP among Middle East oil importers by the end of this year.
Debt levels are forecast to grow rapidly in Sudan to 258 per cent of GDP, in Lebanon to 183 per cent and in Egypt over 90 per cent, it said.
The woes of oil-importing nations are also compounded by a sharp drop in remittances from their nationals working overseas, who have been put out of work due to the pandemic, Azour said.
The IMF report also warned that the potential decline in expatriate workers – who account for more than 70 per cent of the labour force in some oil-exporting countries – would also dampen their recovery.
Some 25 million expatriates work and live in the six GCC states, forming half of the population of the group which takes in regional powerhouse Saudi Arabia and the United Arab Emirates along with Bahrain, Kuwait, Oman and Qatar.
Oxford Economics predicted in May that employment across the GCC could fall by 13 per cent this year, with job losses of some 1.7 million in Saudi Arabia and 900,000 in UAE.
Azour said that with so few certainties in the current environment, the situation could be even worse than forecast.
“We are in an odd situation where the level of uncertainty is still high; uncertainty about the capacity to control the pandemic and its expansion, uncertainty about the recovery itself, and also uncertainty about the oil prices,” Azour said.