The International Monetary Fund (IMF) has revised up its projection for the Middle East and North Africa (MENA) region’s growth in 2021 to 3.3%.
In October last year, the IMF projected that the MENA region’s growth would stand at 3.2% for the year 2021.
This follows an addition revision of its 2020 projection for the region’s growth, which rose by 1.2 percentage points to an overall contraction of 3.8%. This compared to a forecast of contraction of 5% in its October Regional Economic Outlook. The MENA region’s growth will hike by 4.2% in 2022, the IMF also projects.
According to Jihad Azour, Director of the IMF’s Middle East and Central Asia Department (MCD), the growth is largely driven by stronger-than-expected performances among oil exporters.
An additional bonus for the region was the absence of a second wave of the novel coronavirus (COVID-19) pandemic in some countries. Along with a lower than expected impact of the pandemic on the region, these have boosted non-oil activity..
“For the Caucasus and Central Asia region, 2020 growth, on average, remains unchanged at a contraction of 2.1%, as some countries’ stronger growth early in the year is estimated to have been offset by weaker fourth quarter (Q4) activity due to the second wave, while others saw a worse-than-expected impact of shocks throughout the year,” the IMF said.
Writing on his blog on the IMF website, entitled “Cooperation Critical to Reducing Divergent Paths to Recovery in Middle East and Central Asia”, Azour added that access to the COVID-19 vaccine will play a critical role in the recovery ahead.
According to its World Economic Outlook (WEO) update report, recently released by the organisation, the IMF maintained its forecast for growth in 2021 at 3%. The figure is the same as its forecast for October 2021, although the organisation upgraded its forecast for the region in 2022 at 4.2%, 0.2 percentage points higher than its October forecast.
“For 2021, our projections relative to October are broadly unchanged but reflect significant differences among countries,” Azour said, “Those countries with diversified vaccine providers and production have more favourable or broadly unchanged forecasts, while the outlook for those with more limited access to vaccines and those harder hit by the second wave looks weaker.”
He added that the countries that put in place stronger fiscal and monetary support in response to the COVID-19 pandemic are also expected to have a stronger recovery, aided by a shallower trough in 2020.
Azour noted, via his blog, that Caucasus and Central Asia countries, as a group, are projected to reach 2019 GDP levels in 2021, due to their stronger COVID-19 response. However, those heavily impacted by the second wave will lag behind and not regain pre-pandemic GDP levels until 2022.
He noted that recovery in the MCD region’s emerging markets is projected to lag that of their peers elsewhere, with most countries not recouping 2019 GDP levels until 2022.
Fragile and conflict-affected states will be especially battered, with 2021 GDP levels projected at 6% lower than in 2019, Azour added.
He said that the road to recovery for the MCD region will hinge on containment measures, access to and distribution of vaccines, the scope of policies to support growth, and measures to mitigate economic scarring from the pandemic.
The coronavirus’s second wave, which began in September, hurt many countries in the region, where infection and death rates far surpassed those seen during the first wave. Most countries resumed selective restrictions to help lessen their negative humanitarian and economic impact, while some have started vaccination campaigns.
“While much work remains to tackle the immediate crisis, the region must also move swiftly and in parallel on building a resilient, stable, and more inclusive post-pandemic recovery,” Azour concluded, “This requires addressing the uneven labour market impact of the crisis and curbing rising inequality, strengthening social protection, tackling crisis legacies, in particular debt overhang, reforming state-owned enterprises and reducing state footprint in the economy, and fighting corruption.”
He also noted that, to accelerate the recovery and avoid a lost decade, work should start now on high-quality investment in green infrastructure and digitalisation.