On Thursday, the International Monetary Fund (IMF) released a statement saying countries in the Middle East are expected to fall behind with other regions and may not recover their 2019 GDP until 2022.
The global pandemic has economically scarred these regions, and cooperation is critical in joining hands to the recovery path.
Director of the Middle East and Central Asia Department at the IMF, Jihad Azour, held that the path to recovery for the Middle East and Central Asia region will highly depend upon the containment measures, access and distribution of vaccines, scope of policies to support growth, and various other measures to alleviate economic damage from the pandemic.
The second wave of Corona, which began in September, caused devastation in these regions where greater infection rates and casualties were recorded, surpassing those seen during the first wave. Many countries resorted to selective restrictions to mitigate humanitarian and economic damages. Some countries have also started vaccination campaigns
He also emphasized how countries with a stronger preventive and recovery program are expected to recover their 2019 GPD earlier. He said, ” Additionally, countries that put in place stronger fiscal and monetary support in response to COVID-19 are also expected to have a stronger recovery, aided by a shallower trough in 2020. In particular, while Caucasus and Central Asia countries as a group are projected to reach 2019 GDP levels in 2021—due to their stronger COVID-19 response—those heavily impacted by the second wave will lag behind and not regain pre-pandemic GDP levels until 2022.”
He projected the lag of countries in the Middle East Asia and Central Asia region to other regions, especially countries dealing with conflict in addition to the pandemic.
He said, “Recovery in the Middle East and Central Asia 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 percent lower than in 2019.”
He said that access to the COVID vaccine is of paramount importance on the road to recovery. He mentioned that countries with a more diversified and accessible vaccine plan will make a significant head start compared to countries that have difficulty doing so. The IMF further noted that the Gulf Cooperation Council (GCC) has the most extensive coverage for vaccination. They also have comparatively most advanced plans with agreements, in some cases, doses over the actual need to inoculate the entire population have been made.
In its October 2020 forecast, the IMF has reviewed the Middle East and North Region by 1.2 percentage points and an overall contraction of 3.8 percent. It expects 3.1 percent in 2021 and 4.2 in 2022.
He stated that their forecast for 2021 relative to October 2022 remains broadly unchanged.
He said, “Further spending needs could exacerbate debt sustainability concerns in several countries, especially if a sharp rise in global risk premia or higher-than-expected increase in global interest rates tighten financing conditions and raise rollover risks.”
He also stated that a lot of work remains to tackle the immediate crises. The regions should work together in building a resilient, stable, and inclusive post-pandemic recovery.
The IMF further advised that these regions should invest in green infrastructure and digitalization to speed up the recovery and avoid a lost decade.
He said, “This requires addressing the uneven labor 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,”
IMF’s Azour said that the risks still remain high as new infections could delay recovery in the absence of vaccines and policy space. The recent variants of COVID could also pose additional challenges.
Last year, the IMF had provided a fund of $17.3 billion to the region for tackling health and economic crises.