The International Monetary Fund (IMF) lowered its economic forecast for the Middle East and Central Asia (Meca) region, which is now set to contract 4.7 per cent this year, on the back of the Covid-19 pandemic and lower oil prices.
The latest projection is 2 percentage points lower than the fund’s April estimate, the IMF said in its latest Middle East and Central Asia Economic Outlook.
The deeper contraction is in line with revisions to the global economy’s outlook, which is forecast to contract 4.9 per cent this year, according to the Washington-based fund.
The pandemic will continue to test the economic resilience of MECA countries given the “unusually high uncertainty” of the outbreak’s impact on businesses and risk from a potential return of volatility in global oil markets dominates the regional outlook, the IMF said.
Though the region’s response to the pandemic was swift and saved lives, the policies have also had a large impact on domestic economic activity, the lender said.
“A sharp decline in oil prices together with production cuts among oil exporters and disruptions in trade and tourism added further headwinds,” it said.
Oil prices, which slumped more than 70 per cent this year, have recovered after the OPEC+ group of oil exporters, led by its biggest producers Saudi Arabia and Russia, agreed to output cuts to curtail supply in the market. Crude prices, however, remain significantly lower than their peak last year.
Several countries in the region have started opening their economies; however, “rising infection numbers may pose risks,” it added.