Economic activity in the Middle East and Central Asia was resilient with recovery continuing in 2022 but the region must guard against growing global headwinds and push ahead with reforms, the International Monetary Fund said on Monday.
While crude exporters benefit from an oil windfall projected to accrue a cumulative $1 trillion over 2022-2026, emerging market and middle-income states face deep terms-of-trade shock and curtailed access to market financing.
Countries should be on alert as “headwinds are growing, vulnerabilities are growing” with a global economic slowdown, volatile food and energy prices and tightening financial conditions, IMF Middle East and Central Asia Director Jihad Azour told Reuters ahead of the October report’s release.
He said the region needed to “act now, act fast and act in a comprehensive way” on structural reforms, and that oil exporters should use this opportunity to strengthen their buffers.
An urgent policy challenge was tackling the cost-of-living crisis by restoring price stability, protecting vulnerable groups through targeted support and ensuring food security. “Higher food prices and more pervasive food and energy shortages could lead to food insecurity and social unrest, particularly in 2023,” the IMF report said, warning of broad-based inflation.
The impact of the Ukraine war on Caucasus and Central Asia (CCA) was milder than expected, it said, with GDP seen slowing to 3.8% in 2022, upgraded from the April forecast of 2.6%.
In the Middle East and North Africa GDP was forecast to grow 5% this year, up from 4.1% in 2021, and then expected to slow to 3.6% in 2023 due to worsening global conditions.
Higher interest payments and increased reliance on short-term financing in some emerging markets and middle-income countries such as Egypt, Pakistan and Tunisia were expected to raise public gross financing needs to $550 billion over 2022-23.
Published in The Express Tribune, November 1st, 2022.
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