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By Davide Barbuscia
DUBAI (Reuters) – Possibly the countries of the Middle East and Central Asia would take a decade to return to economic expansion before the coronavirus crisis, the International Monetary Fund said, as long-standing regional vulnerabilities weigh on its recovery.
The lack of diversification between oil-exporting countries and the dependence of oil importers on sectors such as tourism, as well as their reliance on remittances, are likely to slow growth, the IMF said monday in its outlook for the region, covering some 30 countries. Mauritania to Kazakhstan.
Oil exporting countries were the most affected, with oil costs at approximately 40% below pre-crisis levels, reducing their main source of income and reflecting their limited good fortunes in diversifying their economies.
“The COVID-19 crisis represents the fastest economic surprise of its intensity in history,” the IMF said.
Economic “scars,” which come with long-term losses to growth, the source of income, and employment, are likely to be deeper and more sustainable than after the 2008-09 global monetary crisis, he said.
Five years after this crisis, the genuine gross domestic product of Middle East and Central Asian countries decreased by more than 4% than pre-crisis trends.
“This time, given pre-existing vulnerabilities, it is estimated that in five years, countries in the region may be just 12% below the GDP point implied in pre-crisis trends, and returning to trend grades can take more than a decade,” the IMF said.
The Washington-based IMF expects the region’s economies to contract by 4. 1% this year, a contraction of 1. 3 percentage points higher than it had predicted in April.
“Crisis control, the precedent of saving lives, has had an effect on economic activity that has been disturbed by the surprise of oil prices, but I would say, relatively speaking. Array. . . the result in 2020 is acceptable, “Jihad Azour, head of the IMF’s Middle East and Central Asia department, told Reuters.
“This has exacerbated vulnerabilities,” he said.
The IMF estimates that oil will average $41. 69 consistent with the barrel this year and $46. 7 consistent with the barrel in 2021. Last week, it reduced its projections of genuine GDP by 2020 for Gulf countries with an oil-rich peak.
For regional oil importers, the benefits of lower oil costs were offset by the effect of the crisis on trade, tourism and remittances.
Inequality
The slowdown limited the region’s ability to provide fiscal aid during the crisis, with budget packages averaging about 2% of GDP, less than the average of 3% in emerging markets and emerging economies.
“The average budget duration in the region is the smallest among regional groups, reflecting existing and crisis-created budget constraints,” the IMF said.
The crisis has also highlighted the region’s dependence on expatriate labor in the Gulf, where thousands of employees have left after wasting their jobs.
“Employment history can be much worse than after the global currency crisis,” the IMF said. Inequality is likely to widen as casual jobs become more affected and social networking remains low, he said.
Countries with Gulf Remittances will also see a decrease in in tickets.
<< On average, remittances to oil importers in the Middle East, North Africa, Afghanistan and Pakistan would take more than 4 years (twice as long as the global currency crisis and oil shock of 2014-2015 ) at crisis levels, "said the IMF.
(Report via Davide Barbuscia, edited through Larry King)