IMF MENA: An Uneven Recovery amid High Uncertainty

On April 18^th, 2024, the International Monetary Fund (IMF) issued a report concerning the regional economic outlook for the Middle East and Central Asia titled “An Uneven Recovery amid High Uncertainty”. In this economic digest, we will mention in brief the main points discussed in the press remarks of Mr. Jihad Azour, the Director of Middle East & Central Asia Department in the IMF related to MENA region.

The press remarks have drew attention to four main points from Middle East and Central Asia report, (i) growth, (ii) inflation, (iii) vulnerabilities & challenges, and (iv) balancing policy priorities.

The expected growth in the MENA region is 2.7% in 2024 which improved moderately compared to 1.9% in 2023. However, the regional challenges starting in Sudan and then followed by Gaza war and its consequences on the Red Sea in addition to GCC oil production cuts weighed on the expected growth. These challenges resulted in a 0.7 percentage point decline from October 2023 projections.

In 2025, growth is expected to reach 4.2% assuming that the consequences of the above mentioned challenges will lessen gradually within time. Non Hydrocarbon activity is expected to be the leading contributor to growth in GCC countries as they are diversifying their revenue streams. Simultaneously, MENA emerging market and middle-income countries, with high interest payments, face fiscal pressures and eroded fiscal positions. Regarding low-income countries, some of them are expected to experience improved economic conditions in 2025.

When it comes to inflation, it is anticipated to decline in 2024 & 2025 to record 15.4% and 12.4% respectively after peaking in 2023. However, the inflation is expected to average 8.8% and 7.8% in 2024 & 2025 when excluding Egypt and Sudan that are facing high inflation.

Despite the projected growth and anticipated decline in inflation, challenges and risks may persist in 2024 and 2025 mainly due to Gaza war in addition to oil price volatility, high debt and financing needs, and burden on trade and transportation.

Finally, policy makers have to balance between developing medium-term growth projections and maintaining macroeconomic steadiness. In such situation, there are few thoughts that should be considered. First, it is crucial to guarantee central bank independence and increase transparency while bolstering monetary policy frameworks. Second, fiscal policy and dynamic debt management is a must in order to decrease debt notably. Third, countries should strengthen its institutions and speed up reforms to encounter increased uncertainty. Lastly, countries must capture new trading prospects by easing trade barriers, differentiating products and markets, and developing infrastructure.

Find below some worth-noting figures regarding MENA region.

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