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Mideast 'early inoculators' to recover by 2022: IMF

The IMF said that an uneven vaccine distribution would derail the region's rebound [Getty]

Date of publication: 11 April, 2021

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The International Monetary Fund raised its 2021 MENA growth forecast because of early inoculation of the vaccine, while saying inequalities are deepening between countries.
The economies of "early inoculating" countries in the Middle East and North Africa will bounce back to pre-pandemic levels next year, the International Monetary Fund said on Sunday, after raising its 2021 MENA growth forecast.

The region, which includes the Arab countries and Iran, saw its real GDP growth shrink by 3.4% in 2020 due to lower oil prices and sweeping lockdowns to prevent the spread of the coronavirus. 

But with rapid vaccination campaigns underway particularly in the Gulf countries, the IMF earlier this week predicted that GDP growth would rise to 4.0% this year, an upgrade of 0.9% from the last projection.

"This recovery is moving on a diverging path with the vaccine rollout and the policy response playing an important role in the quality and the depth of the recovery," Jihad Azour, director of the Middle East and Central Asia Department at the IMF, told AFP in an interview.

"This multi-speed recovery is on different levels, one between those who are fast in inoculating the vaccine and who will rapidly reach a level of full coverage of their population or 75 percent or so, and those who will be slow in vaccinating, and those who will be late," he added.

By contrast, access to adequate vaccine supplies remains a challenge for many others due to worldwide shortages, internal conflicts or political troubles, and weak finances.

A 'divergent recovery'

The IMF said that an uneven vaccine distribution would derail the region's rebound, as the prospects of rich and poor countries diverge.

From Yemen and Sudan to Libya and Lebanon, where inflation soars, instability prevails and wars have left lasting scars, the damaging effects of the pandemic will drag on and cause economic harm, the IMF said - possibly for years to come.

"We are a year into the crisis and recovery is back, but it is a divergent recovery," Azour told The Associated Press. "We are at turning point. ... Vaccination policy is economic policy."

For oil-rich economies, yawning deficits are expected to halve this year as revenues climb, more arms get jabbed and lockdown measures recede, said Azour.

Thanks to strong government management of the virus' successive waves and the jolt in oil prices, Saudi Arabia's economy will expand 2.9% - compared to last year's contraction of 4.1%.

Higher oil prices come as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies keep a lid on production and it seems unlikely that the United States will quickly lift sanctions on Iran's critical oil sector.

Read also: OPEC+ countries expected to keep output cuts to aid Covid recovery

The IMF expects the UAE's economy to grow this year by 3.2% with Dubai's World Expo, now rescheduled for October 2021, key to the nation's recovery. Dubai hopes the massive event will draw 25 million visitors and a series of deals, heralding a bright post-pandemic future.

The UAE has launched among the world's fastest inoculation campaigns, with over 90 doses administered per 100 residents as of this week.

Still, the collapse of hospitality, tourism and retail presents challenges for Dubai, where a cascade of layoffs hit foreign workers and slashed the emirate's population by 8.4%, according to ratings agency S&P Global.

The outlook is bleaker for fragile and developing economies, many with lagging vaccination campaigns, few resources for fiscal stimulus and revenues drawn heavily from sectors like tourism that have been slowest to recover from the pandemic.

Whereas rich countries plan to vaccinate most of their population in a few months, swaths of the region - from Afghanistan and Gaza to Iraq and Iran - likely won't inoculate a significant portion of their populations until mid-2022, the IMF said.

Even that estimate may be optimistic. The region's lowest-income countries could end up waiting until 2023 at the earliest for mass vaccination, according to the report.

Meanwhile, many countries' beleaguered health systems are straining under resurgent waves of infections, prompting authorities to impose new restrictions and inflict more economic pain.

The IMF expects a sluggish 2021 recovery for Egypt and Pakistan, oil importers reliant on tourism that saw an exodus of foreign investors last year.

The fund revised down its growth estimate for Jordan, where the youth unemployment rate has skyrocketed to 55%.

Sudan remains mired in debt and threatened by instability, but its economy could grow for the first time in years as it gains new access to international financial networks.

Lebanon, in the midst of its worst financial crisis ever, remains the only Mideast economy at risk of further contraction.

The country has defaulted on its foreign debt and failed to implement economic reforms, let alone form a government. A giant explosion at the Beirut port last year wreaked havoc on the capital. Discussions with the IMF led nowhere after the Cabinet quit.

Azour declined to even offer a specific economic forecast for Lebanon this year, citing "all the uncertainties".

In Iran, the IMF found reason to praise economic growth after years of decline, noting that the government's resistance to virus-induced lockdowns that would have devastated its sanctions-hit economy had saved it from the worst of the pandemic's fallout.

The country's economy is expected to grow 2.5% in 2021, Azour said, building on slight gains last year.

But Iran's recovery remains far off as its vaccinations lag, inflation eliminates people's savings and economic policies overlook the most vulnerable.

The IMF continues to consider Iran's $5 billion assistance request, which would be its first loan since 1962, while American sanctions remain in force as torturous discussions begin over a return to Tehran's tattered 2015 nuclear deal with world powers.

"A removal of the recently implemented sanctions will of course allow the Iranian economy to export more, trade more, and this will have a positive impact," said Azour, while urging the government to tame inflation and better incorporate the private sector.

Despite the worsening inequality, the pandemic has shown the fortunes of the Mideast's richest and poorest countries to be increasingly intertwined.

Surging infections and foundering inoculation anywhere in the region could spread new variants that threaten overall economic and public health, the IMF reported.

"Therefore, any regional cooperation would be welcome going forward," said Azour.

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