The International Monetary Fund (IMF) said in its April regional economic outlook that it expects the GDP for the Middle East and North Africa (MENA) region to reach 4% in 2021 and 3.7% in 2022.
This reflects an upturn from the -3.4% it projected in 2020, and also up from its October regional outlook forecast of 3.2% in 2021.
The IMF said that the GDP of the MENA oil importers which include Egypt will reach 2.3% and 4.5% in 2021 and 2022 respectively, up from -0.8% in 2020.
Jihad Azour, Director of the Middle East and Central Asia Department at the IMF, said at a press conference on the side lines of the World Bank’s and IMF’s spring meetings, that when the IMF convened its spring meetings for the first time virtually, the world was grappling with the outbreak of one of the most severe humanitarian and economic crisis.
“Our region reacted swiftly and with resolve, implementing measures that helped contain the pandemic spread and cushion the economic blow,” Azour said, “Now, year later, the novel coronavirus (COVID-19) vaccine and favourable external environment, offer hope that the end of the crisis is within sight.”
He explained that the growth is expected to pick up in the region, while the 2021 path to recovery is expected to be long and divergent, both across and within countries with many falling behind.
Azour said that the reasons behind this is that, firstly, the progress of the vaccine rollout varied widely across the region. Some countries, such as the Gulf Cooperation Council (GCC), are in the advanced stages of vaccination, while others are lagging behind, as widespread inoculation is not expected until 2022 or2023.
“Secondly, fragile and conflict affected states, especially those with low incomes, face a particularly difficult path ahead, giving their limited vaccine access and ongoing instability,” he said.
He said that the third reason is that economies that are heavily reliant on contact intensive sectors especially tourism will recover more slowly.
“Lastly, countries that did not implement strong policy support in the wake of the pandemic, are now further behind on the road to recovery,” Azour said, “Meanwhile, the rise of oil prices helping the fiscal and external balances of oil exporters and supporting the recovery of the non-oil sector, although OPEC plus cuts are limiting their impact on overall growth.”
He said that the outlook remains highly uncertain, with the passage of the pandemic and vaccination and available policy space, all having a significant impact on individual country forecasts.
Azour said that the pandemic has exacerbated many economic challenges in the region, and further exposed how much work remains to be done to protect the most vulnerable and create jobs. This also includes providing equal opportunities for women and young people, and also reduce poverty.
He said that one particular concern going forward is rising government debt and growing financing pressures that have worsened in the last year, and which will constraint further policy actions.
“This is particularly important considering the risk of a rapid rise in US bond yields, which could lead to tighter financial conditions, renewed capital outflow and higher sovereign spreads,” Azour said, “And then adding these and other challenges will help shape the region’s future, which is why countries must consider 2021 the year of policymaking.”
He said that this would help exit the crisis, accelerate the recovery while preserving debt sustainability and build forward better toward more inclusive, resilient, and green economies.
Azour then talked about the needed policies to emerge from the crisis toward a better future, with securing access to vaccines and supporting health systems remaining the most urgent imperatives.
He said that accelerating vaccinations could boost GDP growth by 1% by 2022, and that the regional and international cooperation will be critical to ensuring that low income countries are not left behind.
“Second, there needs to be help accelerating the recovery, as it will be important to take policy support flexibly,” he added, “Well, targeted, and in place until the recovery is well entrenched for the many countries without policy space further support should be calibrated to safeguard debt sustainability.”
Azour said that developing medium-term fiscal frameworks and a debt management strategy will help to reduce elevated debt burdens, while providing maximum support to growth.
He said that support in all countries should target viable firms, especially small ones.
Azour said that preparing workers for the post pandemic world will also be vital, especially for the regions with large youth population.
“Finally, to build forward better, countries will need to start addressing deep seated transformation challenges, such as persistent unemployment, inequality, and climate change, capitalising on lessons learned during the pandemic and leveraging digitalisation,” he said, “This will help prepare the economies for the future, and improve the efficiency of social safety nets, health and education, which are so critical to reducing poverty and inequality.”
He assured that improving governance and reforming the large public sector enterprises should also be prioritised, as well as policies that adapt and invest in climate resilient infrastructure.
Azour concluded by saying the IMF supported the MENA region with over $17bn in financing last year. The fund will remain a steadfast partner in these efforts through additional financing, technical assistance, capacity development, and policy advice.