The recovery in the Middle East and Central Asia region is uneven and incomplete and must fully take hold throughout the region, announced the IMF in a press briefing held today (Tuesday, October 19, 2021) to launch the Middle East and Central Asia’s latest Regional Economic Outlook report.
“We project real GDP for countries in the Middle East and North Africa to expand by 4.1 percent in 2021 and in 2022, after contracting by 3.2 percent last year. Real GDP growth in the Caucasus and Central Asia is projected at 4.3 percent this year and 4.1 percent in 2022, following a contraction of 2.2 percent last year,” said Jihad Azour, Director of the Middle East and Central Asia department at the IMF.
This year’s projection is a marked improvement from the last year's sharp contraction. Yet, the recovery has been uneven, and the success of the vaccine rollout varies widely, with low-income countries and fragile and conflict affected states showing limited progress. Going forward, concerns about economic scarring and divergent recovery prospects persist.
“Over the medium term, real GDP is expected to remain below pre-crisis projections by around 2.5 Percent in MENA and 7 percent in the CCA. Countries that managed to recover more quickly will also have lower output losses. At the same time, the employment recovery remains weak and rising inflation is reducing the ability to use monetary policy to spur growth. In addition, risks have increased with a renewed uncertainty around new pandemic waves, vaccination delays, tighter global financial conditions, social unrest and geopolitical risks, as well as climate shocks. Inequities are on the rise with the young people, women and the migrant workers, as well as small companies bearing the brunt of the crisis,” explained Azour.
The report also assessed the impact of the crisis on the region's corporate sector and found that region’s firms are not recovering equally, even though the corporate sector has bounced back to pre-pandemic levels. Smaller firms and those in contact intensive sectors are lagging behind. With digital enabled firms, those with strong pre-crisis fundamentals were able to mitigate the pandemic's impact.
Azour concluded the press briefing with remarks on how the current situation could prove to be a transformational moment for the region as it looks ahead to a more inclusive, resilient, and greener future.
“With limited policy space recovering from the pandemic will require countries to manage difficult policy tradeoffs. Accelerating vaccine acquisition and distribution, particularly by low-income countries, remains the most urgent priority and will require strong global and regional cooperation. In the meantime, policy support should target the most vulnerable and the eventual withdrawal should be gradual and well communicated. If inflation proves persistent, central banks may need to adjust policy rate policies to prevent de-anchoring inflation expectations. Improving policy framework will be important to reduce tradeoffs and bolster credibility,” said Azour.
To watch the full event, click here