The Middle East and North Africa (Mena) economy will contract by 3.3% this year, the biggest slump in four decades, hammered by the coronavirus and low oil prices, the IMF said Tuesday.
In its World Economic Outlook, the International Monetary Fund said the damage would be much worse than the region’s last major shock, the 2008-09 global financial crisis, when it managed to post modest growth.
The region, which includes all Arab countries and Iran, will suffer its worst economic performance since 1978 when it was convulsed with unrest and shrank by 4.7%, according to World Bank data.
The IMF said that all the Arab countries will see their gross domestic product (GDP) fall this year.
Saudi Arabia, which is just emerging from an oil price war with Russia that saw crude prices crash, is headed for a 2.3% contraction.
“The fast deterioration of the global economic outlook as the epidemic has spread and the breakdown of the Opec+ agreement among oil suppliers have weighed heavily on commodity prices,” the global lender said.
Its report was prepared before the Opec+ grouping — which takes in Opec producers and allies — reached agreement on Sunday to cut output by nearly 10mn bpd, the largest in history.
From mid-January to end-March, oil prices dropped by 65% or $40 a barrel and natural gas prices declined by 38%, the IMF said.
It also projected prices to remain below $45 a barrel through 2023, around 25% below the average last year.
Arab countries, which have reported more than 20,000 coronavirus cases along with over 700 deaths, have resorted to sweeping lockdowns and curfews to prevent the spread of the disease, disrupting local economies. Years of conflicts in several Arab countries including Syria, Yemen, Iraq and Libya have already battered their economies and created widespread poverty.
And many Middle Eastern countries, notably the Gulf states plus Iraq and Iran, depend heavily on oil revenues to finance their budgets.
“These developments are expected to weigh heavily on oil exporters with undiversified revenues and exports,” said the IMF, adding that lower oil prices will meanwhile benefit oil-importing nations.
The IMF said that the latest oil output cut will further dampen the prospects of the Saudi economy, which grew by just 0.3% in 2019.
The UAE is projected to contract by 3.5%.
Iran’s economy, the second largest in the Middle East, is forecast to shrink 6.0% in 2020 for its third contraction in a row.
In 2018 and 2019, it shrank by 3.6% and 7.6% respectively.
Iran has been hit hard by the coronavirus, reporting more than 73,000 cases and 4,585 deaths.
The economy of Lebanon, which has defaulted on its mountain of debt, is expected to contract by a massive 12%, while Iraq, Opec’s second-largest producer, is headed for a fall of 4.7%.
As a whole, the Middle East and North Africa economy, which grew by just 1.0% last year, is projected to rebound by 4.2% in 2021, the report said.
But the IMF noted that “extreme uncertainty” surrounds its forecast because the economic fallout of the pandemic depends on factors that are hard to predict — including the pathways of the disease and the intensity of containment efforts.
Flames emerge from flare stacks at Nahr Bin Umar oilfield, as a worker wears a protective mask, following an outbreak of coronavirus, north of Basra, Iraq on March 15. Many Middle Eastern countries, notably the Gulf states plus Iraq and Iran, depend heavily on oil revenues to finance their budgets.
