A tourist walks through Terminal 3 at Dubai Airport in the United Arab Emirates on July 8, 2020, when the country opened its doors to international visitors in the hope of reviving its tourism industry after a nearly four-month closure.
Giuseppe Cacace | AFP | Getty Images
The International Monetary Fund revised its growth forecasts for the Middle East and North Africa again downwards to an “unusually high level of uncertainty”
It now expects MENA economies to decline 5.7% by 2020. In April, it predicted that the region would shrink 3.3% for the year.
“The unusually high level of uncertainty regarding the length of the pandemic and its impact on closed closures, the resulting post-crisis risks (including social unrest and political instability) and potential renewed volatility in global oil markets dominate the outlook,” the report says.
Jihad Azour, head of the IMF division in the Middle East and Central Asia, said the region experienced “twin shocks” with the coronavirus pandemic and depressed oil prices.
“Dealing with this crisis had a huge impact and a toll on the economy and that’s why we had to revise our growth rates down this year,” he told CNBC’s Hadley Gamble on Sunday.
“I would say (the downgrade is) in line with most countries in the world, but in our part of the world, with the diversity of economies and the links between oil exports and oil imports, this will be a challenge going forward,” he said.
The IMF also lowered its expectations of the global economy last month and now sees a 4.9% reduction in global gross domestic product by 2020.
Within the region, oil exporters are estimated to suffer more than importers, the fund says.
GDP growth for oil exporters for MENA, Afghanistan and Pakistan is expected to fall to a negative 7.3%, compared with a 1.1% decline for oil importers. It reflects the “double whammy” of oil price fluctuations and Covid-19 lockdowns.
For oil importers, the benefits of lower oil prices “are mostly offset by hindered trade, tourism and transfers” as well as tighter global financial conditions and emissions in domestic credit markets, the IMF said in its report.
It also said that growth audits appeared to be linked to lockdowns and mobility. Countries including Saudi Arabia and the United Arab Emirates, which had stricter restrictions on movement, saw major GDP revisions.
S&P Global predicted that Dubai, which relies on industries such as tourism, hospitality and retail, could see its economy shrink 11% this year. The city was under a strict 24-hour lockdown at one point, but reopened to tourists last week after nearly four months of border closure.
Asked if further revisions to the forecasts are possible, the IMF’s Azour said it depends on factors such as the strength of the economic recovery, whether a second outbreak of the corona virus could occur and how oil prices behave.
“What can be said 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 follow this recovery, while keeping a strong eye on the crisis,” he added.
– CNBC’s Emma Graham, Natasha Turak and Silvia Amaro contributed to this report.