IMF: Mideast economy recovering but uncertainty continues

DUBAI — The Middle East and North Africa (MENA) is on track to economic recovery, but rising social unrest and unemployment are threatening to hinder "progress", the International Monetary Fund (IMF) said on Tuesday.

The MENA region, which includes the Arab countries and Iran, saw its real gross domestic product (GDP) growth shrink by 3.1 per cent in 2020 due to lower oil prices and sweeping lockdowns to prevent the spread of the coronavirus.

But with rapid vaccination campaigns, particularly in the Gulf nations, the IMF predicted that GDP growth would rise to 4.1 per cent this year, a slight upgrade of 0.1 per cent from the last projection in April.

"The region is going through recovery in 2021. Since the beginning of the year, we see progress in the economic performance," Jihad Azour, director of the Middle East and Central Asia Department at the IMF, told AFP in an interview.

But "this recovery is not the same in all countries. It is uncertain and uneven because of the divergence in vaccination... and geopolitical developments", Azour added.

The IMF said this month that while prospects for oil-exporting economies improved with higher oil prices, low-income and crisis-hit countries are witnessing "fragile" recoveries.

It warned of "a rise in social unrest" in 2021 that "could pick up further due to repeated infection waves, dire economic conditions, high unemployment and food prices".

Unemployment rates increased in MENA last year by 1.4 per cent to reach 11.6 per cent. 

This rise exceeds that seen during the global financial crisis and the 2014-15 oil price shock, the IMF said.

The fund also warned of the longer-term risk of the uneven recovery, which could lead to a "permanent widening of existing wealth, income, and social gaps and, ultimately, weaker growth and less inclusive societies".

About seven million more people in the region are estimated to have entered extreme poverty during 2020-21 compared to pre-crisis projections, according to the IMF.

In Lebanon, the continuing drop in the value of the currency has dashed hopes that the government formed last month can stem an economic crisis, branded by the World Bank as one of the worst since the mid-19th century.

Nearly 80 per cent of the Lebanese population lives below the poverty line. 

"The Fund has already started technical discussions with the authorities... to develop what would be in fact that the framework within which the fund can help Lebanon," said Azour, a former Lebanese finance minister.