DUBAI: The Middle East and North Africa economy will contract by 3.3 percent this year, the biggest slump in four decades, hammered by the coronavirus and low oil prices, the IMF said on Tuesday.
In its World Economic Outlook, the International Monetary Fund said that 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 percent, according to World Bank data. The IMF said that all the regional countries apart from Egypt will see their gross domestic product (GDP) fall this year.
Saudi Arabia, the region’s heavyweight which is just emerging from an oil price war with Russia that saw crude prices crash, is headed for a 2.3 percent 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 10 million barrels a day, the largest in history.
From mid-January to end-March, prices dropped by 65 percent or $40 a barrel and gas prices declined by 38 percent, the IMF said. It projected prices to remain below $45 a barrel through 2023, about 25 percent below the average last year.
Arab countries, which have reported more than 20,000 coronavirus cases along with more than 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 battered their economies and created widespread poverty. And many Middle Eastern countries, notably the Gulf states plus Iraq and Iran, depend 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 UAE’s economy, the most diversified in the region, is projected to contract by 3.5 percent, while Qatar, the third-largest in the Gulf, is expected to slide 4.3 percent. Iran’s economy, the second largest in the Middle East, is forecast to shrink 6 percent for its third contraction in a row.
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 debt, is expected to shrink by 12 percent, while Iraq, OPEC’s second-largest producer, is headed for a 4.7 percent fall.
Only Egypt is projected to stay in positive territory with 2 percent growth, although that is way down from the 6 percent projected before the coronavirus crisis hit.