The International Monetary Fund (IMF) has revised its growth forecasts for the Middle East and North Africa (MENA) downward again amid an unusually high level of uncertainty regarding the length of the pandemic, according to its latest regional economic report.
The IMF now expects MENA economies to contract 4.7% in 2020. In April, it had predicted that the region would shrink 2.8% for the year.
The Middle East region has reacted to the global COVID-19 pandemic with swift and stringent measures that have saved lives. However, these policies have also had a large impact on domestic economic activity, stated the report.
‘With several countries in the region reopening in past weeks, and a recent uptick in activity, rising infection numbers may pose risks. A sharp decline in oil prices together with production cuts among oil exporters and disruptions in trade and tourism added further headwinds. As a result, growth in the region is now projected to be down by 4.7 percent in 2020, two percentage points lower than in April 2020.’
Explaining the outlook for the region, the IMF stated that the unusually high level of uncertainty regarding the length of the pandemic and its impact on firm closures, the resulting downside risks (including social unrest and political instability), and potential renewed volatility in global oil markets dominate the outlook.
‘The pandemic will continue to test countries’ health capacity and economic resilience. While ensuring strong health systems remains the immediate priority, governments should also focus on supporting the recovery and setting up resilient and well-targeted social safety nets,’ it added.
‘The downturn could be less severe than forecast if, for example, there is an earlier than-expected availability of a vaccine or if country authorities find a way to maintain activity (and health systems) without stringent lockdowns in the face of any subsequent waves.’
Governments need to continue ensuring that health systems are adequately resourced, strong, and resilient, regardless of where the country is in the progression of the pandemic, IMF stated.
‘As countries in the region continue to reopen, policymakers should also focus on facilitating recovery. This will require progressively unwinding some of the emergency support and aiding the reallocation of workers away from contact-intensive sectors such as tourism – if needed, through hiring subsidies, retraining, and easing labour market rigidities and entry barriers — while tackling rising poverty and inequality. The exit from emergency support should be gradual to avoid sudden income losses and bankruptcies just as the economy is recovering.’
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