Regional Economic Outlook Update: Middle East and Central Asia
The International Monetary Fund raised its forecast for economic growth in the Middle East and North Africa in 2020 by 1.2% to an overall contraction of 3.8%, showing that despite some progress in the fight against the pandemic, the last year was very difficult for the regions..
Recovery will be diverse and based heavily on investment and vaccine distribution strategies. There is still some positive news for the Gulf countries — the lifting of the political and economic blockade begins in Qatar and the GCC, the IMF director for the Middle East and Central Asia told CNBC on Wednesday Jihad azur.
Details of the reconciliation agreement between Saudi Arabia, the United Arab Emirates, Bahrain, Egypt and Qatar have not yet been disclosed, but Azur believes that «any action to open borders and improve economic relations will provide additional potential for GDP growth».
«Of course, this will improve trade, especially affecting the prices of goods and services. This will reduce the cost of purchases, for example, for Qatar, and also help airlines. Improving economic relations is always beneficial, especially now that we are entering a new phase of globalization», – he added.
The news, which led to the end of a dramatic three and a half year dispute, is also a likely springboard for investment, Azur said.. «I think this is good for business in both the short and long term, in terms of providing more space for investors.».
«Qatar Financial Center is committed to attract $ 25 billion in foreign direct investment by 2022 year as a result of the thaw in relations with neighbors», – wrote CNBC in January. Civil aviation and food production are some of the areas that are likely to see major positive changes.
In the region as a whole, the forecast improvement was based on «stronger-than-expected performance among oil exporters, since the absence of a second wave in some countries stimulated activity in the segment, and the impact of the first wave was not as heavy as experts had assumed», – says the IMF report on regional prospects.
However, these prospects will largely depend on the government’s vaccination plans.. This ranges from countries with very well diversified vaccine contracts and manufacturing facilities, to fragile, conflict-ridden states that rely heavily on COVAX.», – wrote Azur in his report. COVAX is a global scheme led by the International Vaccine Alliance and WHO to ensure equal access to vaccinations for every country in the world.
The differences are clear: wealthy Middle Eastern states like the UAE and Israel are on track to vaccinate half of their population by March and boast the fastest vaccination rates, while poorer countries and territories like Palestine are heavily dependent from COVAX and have not yet yet received vaccines for their population.
«Our analysis shows that countries that have invested heavily in accelerating vaccinations will see recovery move faster.», – noted Azur.
Countries that have implemented stronger fiscal responses to the Covid-19 crisis are also expected to see more substantial growth in 2021.