Regional Economic Outlook: Middle East and Central Asia, October 2020
IMF again worsened the forecast of economic recovery in the Middle East and Central Asia
The International Monetary Fund downgraded its outlook for the Middle East and Central Asia economic recovery, projecting a 4.1% contraction for the region as a whole, 1.3 percentage points worse than the fund’s previous estimate.
Jihad Azur, Director of the Middle East and Central Asia Department of the IMF, noted the large gap in economic losses between oil importing and exporting countries as the region was hit by the coronavirus pandemic and falling commodity prices.
«Together, these two shocks have led to a sharp decline in economic activity, which differs between exporting and importing countries of black gold.», – he said in an interview with CNBC.
«On average, we will see negative growth of 6.6% for exporting countries and a fall of 1% for countries in the second group.», – added Azur.
Oil prices will be the most important factor in the growth of financial performance in countries such as Saudi Arabia, Iraq, Iran, UAE, Bahrain and Kuwait, for which the sale of this energy carrier accounts for the bulk of revenues.. While prices have recovered from their historic fall in March this year, the international benchmark Brent oil still trading nearly 40% below pre-crisis levels. On Monday morning in London, Brent was worth about $ 42.87 a barrel.
The IMF does not expect a sharp jump in oil prices anytime soon, predicting prices in the $ 40 to $ 50 range in 2021. This is half the level required by OPEC in order to balance the budget. Saudi Arabia.
Oil demand outlook remains bleak amid new waves of coronavirus sweeping regions of the world, as well as uncertainty over US fiscal stimulus and presidential election. The International Energy Agency in September lowered its forecast global oil demand to 91.7 million barrels per day this year, which means a daily decline of 8.4 million barrels year on year and more than the 8.1 million barrels decline predicted in the agency’s summer report.
OPEC publishes even worse forecast this year, cutting its expectations for global oil demand last month to an average of 90.2 million barrels per day. A group of thirteen oil-producing countries characterized the prospects for demand for black gold as «dubious» and believes that risks remain elevated and biased downward.
Azur stressed that diversification and continued security measures against coronavirus are key factors in strengthening the region’s economy, with a focus on providing opportunities for youth..
«I think it is clear for the Middle East and Central Asia that economic diversification is the best way to get out of the crisis.», – he said.
Diversification will be particularly challenging given the impact on some of the region’s most important non-commodity sectors. Tourism, transportation, retail and real estate have been particularly hard hit by the epidemic. Air travel is expected to recover to pre-crisis levels for several more years.