A tourist walks through Terminal 3 of the Dubai airport in the United Arab Emirates on July 8, 2020, as the country reopened its doors to international visitors in hopes of reviving its tourism industry after a nearly four-month shutdown.
Giuseppe Cacace | AFP | fake pictures
The International Monetary Fund revised downward its growth forecasts for the Middle East and North Africa again amid an “unusually high level of uncertainty,” according to its latest regional economic report.
He now expects MENA economies to contract 5.7% in 2020. In April, he predicted that the region would shrink 3.3% during the year.
“The unusually high level of uncertainty regarding the duration of the pandemic and its impact on company closings, the resulting downside risks (including social unrest and political instability) and potential renewed volatility in global markets for Oil dominate the picture, “the report said.
Jihad Azour, director of the IMF’s Middle East and Central Asia department, said the region experienced “twin shocks” with the coronavirus pandemic and low oil prices.
“Managing this crisis had a huge impact and cost on the economy and that is why we had to revise our growth rates downward this year,” he told CNBC’s Hadley Gamble on Sunday.
“I would say that (the reduction is) in line with most countries in the world, but in our part of the world, with the diversity of economies and the links that exist between the export and import of oil, this is going to be a challenge in the future, “he said.
The IMF also lowered its expectations for the world economy last month, and now sees a 4.9% contraction in global gross domestic product in 2020.
Oil factor
Within the region, oil exporters are projected to suffer more than importers, the fund said.
GDP growth for oil exporters in MENA, Afghanistan and Pakistan is expected to drop to a negative 7.3%, compared to a 1.1% contraction for oil importers. That reflects the “double whammy” of oil price fluctuations and Covid-19 blockades.
For oil importers, the benefits of lower oil prices “are mainly offset by hampered trade, tourism and remittances”, as well as tighter global financial conditions and spillover effects on markets internal credit, the IMF said in its report.
He also said that growth reviews appeared to be related to blockages and mobility. Countries like Saudi Arabia and the United Arab Emirates, which had tighter movement restrictions, saw further GDP revisions.
S&P Global predicted that Dubai, which relies on industries like tourism, hospitality and retail, could see its economy shrink 11% this year. The city was under strict 24-hour closure at one point, but reopened to tourists last week after nearly four months of border closure.
When asked if further revisions to the forecasts are possible, IMF’s Azour said it depends on factors such as the strength of the economic recovery, whether a second coronavirus outbreak could emerge and how oil prices are behaving.
“What you could say is that high-frequency indicators show that economies are recovering and gradually recovering,” he said.
“Now it is important that their policies need to be adapted to accompany this recovery, at the same time that they monitor the management of the crisis,” he added.
– CNBC’s Emma Graham, Natasha Turak and Silvia Amaro contributed to this report.
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