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London – The International Monetary Fund has urged countries in the Middle East and North Africa to accelerate reforms and efforts to diversify the economy at a time when the energy-rich region faces unprecedented challenges due to the emerging Corona virus and the fall of oil prices.
In its latest update to its regional economic outlook this month, the IMF said the region’s gross domestic product would contract 5 percent this year, compared with a previous forecast in July of a 5.7 percent contraction.
But despite the slight improvement, the region, which includes all Arab countries and Iran, will suffer its worst economic performance, surpassing the record contraction of 4.7 percent in 1978, when it witnessed major unrest.
“We must see what is happening today as a call to action and also as an opportunity to stimulate economic transformation and create more opportunities, especially for young people,” said Jihad Azour, director of the Middle East and Central Asia division of the International Monetary Fund.
“We expect growth and unemployment to be affected this year, and this overall crisis could lead to a 5 percent growth drop, as well as a 5 percent increase in the unemployment rate,” he added in a statement. interview with Agence France-Presse via video.
In recent years, the region has witnessed a series of bloody conflicts in several of its countries, including Syria, Yemen, Iraq and Libya, which destroyed their economies and increased their poverty rates on a large scale.
The conflicts have led to a high unemployment rate, which now stands at 26.6 percent for young people, according to World Bank data.
In a videoconference on Monday, Azour said the virus’s repercussions could cause, in the Middle East, North Africa and Central Asia, “deeper and more continuous economic damage than any previous recession due to the unprecedented nature of the crisis.”
He predicted that the economic movement in this region would return to normal “after just a decade,” adding that oil exporters could run a total budget deficit of around $ 224 billion this year.
“Some countries will bear the consequences of this high deficit for about a year,” he said.
Since last March, countries in the Middle East, many of which depend on oil revenues, have resorted to closures and curfews to prevent the spread of the new Corona virus, which has caused the disruption of local economies.
The IMF says that the average price of oil will be $ 41.69 per barrel in 2020 and $ 46.70 per barrel in 2021, far from the average of $ 57 to $ 64 in 2019.
Under this double blow, the growth of oil-exporting countries in the Middle East and North Africa is expected to contract by 6.6 percent, while the economies of oil importers contract by 1 percent to as the epidemic continues to affect tourism and trade.
“We are at a crucial moment where there is hope that the vaccine can accelerate the economic recovery, but there are also challenges with the risk of a second wave of the emerging corona virus,” Azour said during the interview.
Lebanon is the most affected country in the region, as it faces the worst economic crisis since the civil war (1975-1990), causing the local currency to fall against the dollar, doubling the poverty rate to more than half that of population and massive displacements.
According to the International Monetary Fund, the country’s economy is contracting by 25 percent.
Azour warned that “Lebanon needs a comprehensive reform program that addresses deep-seated problems,” at a time when the authority faces charges of corruption and cronyism.
“Of course, this requires the next government to accelerate the pace of reform, which must be comprehensive and supported on a large scale,” he added.
The Saudi economy, the largest in the Arab world, will contract 5.4 percent this year.
This expectation represents a slight improvement from the 6.8 percent rate announced by the fund in July, as the Kingdom suffers the impact of low oil prices and the consequences of the emerging Corona virus, especially after it suspended action. of Umrah and reduced the number of pilgrims.
To limit the negative impact of this “double shock”, the Saudi economy has to “accelerate the diversification process” that has been underway since 2016.
The world’s largest oil exporter says it plans to cut public spending by more than 7 percent next year, as the budget deficit is expected to rise to 12 percent of GDP in 2020.
But at the same time, the government is awarding billions of dollars in contracts for what it says will be the world’s largest construction project as it tries to diversify its economy away from its dependence on oil.
Azour believes that Saudi Arabia needs to accelerate “investment in new sectors”, including technology, “and provide support to small and medium-sized companies that can lead the next wave of diversification.”
