DUBAI, UAE – The International Monetary Fund has raised its economic outlook for the growth of the Middle East and North Africa region by 2020 by 1.2 percentage points to a global contraction of 3.8 %, which shows that, despite some progress since the coronavirus pandemic began, it has still been a brutal year on any account.
The recovery will be varied and will be largely based on countries ’investments and vaccine distribution strategies. But there has been a bright spot for the Gulf states in particular: the removal of the political and economic blockade of Qatar by other GCC countries, IMF Director Middle East told CNBC on Wednesday and Central Asia, Jihad Azour.
Although not all details of the reconciliation agreement between the blocking states (Saudi Arabia, the United Arab Emirates, Bahrain and Egypt) and Qatar are publicly known, Azour told CNBC’s Hadley Gamble that “any improvement in terms of opening borders, improving the relationship will provide additional growth potential. ”
“Of course, this will improve trade, especially at rates for goods and services,” he added. “It will reduce the cost of acquisition, for example, for Qatar, it will also help airlines by reducing the cost. Therefore, there are always benefits to improving economic relations, especially now that we are entering a new phase in terms of of globalization. ”
A security guard checks the temperature of the man arriving at a shopping mall in the Saudi capital Riyadh on May 4, 2020, while shopping malls reopen after authorities began a partial lifting of the closure.
Fayez Nureldine | AFP | Getty Images
The news, which ended in a dramatic 3-and-a-half-year dispute, is also likely for investment, Azour said. “I think that’s good for companies in the short term, but also in the long term, in terms of providing more space for investors. And that’s something that will be valued.”
Qatar’s Financial Center only aims to attract $ 25 billion in foreign direct investment by 2022 as a result of the rapprochement, CNBC reported in January. Airlines, food manufacturing and production are among the other areas that are likely to experience major boosts.
Vaccine strategy will be crucial
In the region, more broadly, the improved outlook was based on “stronger-than-expected yields among oil exporters, as the absence of a second wave in some countries boosted the non-oil activity and the impact of the first wave was lower than “expected,” the IMF wrote in its report on regional prospects.
However, the prospects for recovery are incomplete and will largely depend on government vaccination plans. This ranges “from countries with highly diversified vaccine contracts and production capacity to fragile and conflict-affected states that are heavily dependent on COVAX,” Azour wrote in its report. COVAX is a global scheme led by an international alliance against vaccines and the WHO, established to ensure equitable access to vaccines for all countries in the world.
The disparities are obvious: the rich states of the Middle East, such as the United Arab Emirates and Israel, are on track to vaccinate half their population by March and have the fastest vaccination campaigns in the world, while poorer countries and territories like Palestine depend heavily on COVAX and have not yet received vaccines for their general population.
“Our analysis shows that countries that have invested heavily in accelerating and accelerating vaccination will see the recovery progress faster,” Azour said.
Countries that applied stronger fiscal responses to the Covid-19 crisis “are also expected to have a stronger recovery in 2021, helped by a shallower trough in 2020,” the IMF report wrote.
He added that while there are now several vaccines on the market, the battle is far from over.
“While vaccines shine a light of hope, the road will be long and winding,” the report states. “In the short term, the top priority is to ensure that health care systems have the right resources, including funding for the purchase and distribution of vaccines.”