News Coronavirus watch19 Apr 2020

Middle East:Egypt expected to be only country in the region to grow this year

19 Apr 2020

Egypt is the only country in the Middle East expected to post any GDP growth this year, says the IMF in its "The Middle East and Central Asia Regional Economic Outlook (REO) Update" released on 15 April.

Egypt's real GDP growth is forecast at 2%, although that is still far lower than the 5.6% expansion seen last year.

The latest predictions from the IMF show that the other economies across MENA would shrink this year, with declines ranging from a 1.1% contraction for Kuwait to a 12% decline for Lebanon. (See table below.)

MENA economies – Real GDP (annual % change)   

Country

 

Projections

 

2019

2020

2021

Oil Exporters

 

 

 

Algeria

0.7

–5.2

6.2

Bahrain

1.8

-3.6

3.0

Iran

–7.6

–6.0

3.1

Iraq

3.9

–4.7

7.2

Kuwait

0.7

–1.1

3.4

Oman

0.5

–2.8

3.0

Qatar

0.1

–4.3

5.0

Saudi Arabia

0.3

–2.3

2.9

UAE

1.3

–3.5

3.3

Oil importers

 

 

 

Egypt

5.6

2.0

2.8

Jordan

2.0

–3.7

3.7

Lebanon

–6.5

–12.0

...

Mauritania

5.9

2.0

4.2

Morocco

2.2

–3.7

4.8

Tunisia

1.0

-4.3

4.1

Turkey

0.9

–5.0

5.0

          Source: IMF

Regional outlook

Growth in the Middle East and Central Asia region is projected to fall from 1.2% in 2019 to –2.8% in 2020, as COVID-19 sweeps across the world.

GDP growth is expected to be lower than the growth rates during the 2008 global financial crisis and the 2015 oil price shock— before rising to 4.0% in 2021, as threats from the virus recede and global policy efforts spur recovery.

The COVID-19 pandemic is causing significant economic turmoil through simultaneous supply and demand shocks.

Oil prices have fallen by about 50% since the COVID-19 outbreak, to the lowest point in more than 20 years after adjustments for inflation.

The lower oil and commodity receipts will erode policy space to address the crisis in some countries, put pressures on exchange rates and government budgets, and weaken external positions.

The region also faces falling domestic and external demand, falling consumer confidence, tightening financial conditions, and disruption in production and global supply chains. At the same time, restrictive containment measures introduced by governments in the region and fear of contagion are weakening the region’s consumer demand, particularly in tourism, hospitality, and retail sectors.

Moreover, given heavy employment in these service sectors, there could be significant second-round effects on domestic demand across the region if unemployment rises and wages and remittances fall.

Expectation

Mr Jihad Azour, director of the Middle East and Central Asia Department at the IMF, said, ”The impact could be long lasting. While there is considerable uncertainty around the depth and duration of the crisis, this pandemic will compound the region’s unemployment problem and worsen the already high public and external debt vulnerabilities of many countries.”

Mr Azour, an economist, served as Lebanon’s Finance Minister in 2005-08.

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