According to the International Monetary Fund (IMF), Middle Eastern banks would likely have to absorb $180 billion in delinquent and delinquent loan costs.
In its most recent report on the region’s economic outlook, the IMF said a crisis simulation exercise showed that oil-exporting countries in the Middle East and North Africa, Afghanistan, and Pakistan face bank losses estimated at $150 billion, or 6% of GDP.
Oil-importing countries would be less affected, with losses of $30 billion or 3% of GDP; however, these countries are worse off dealing with unrest, and the IMF warned that many of them could see their minimum regulatory Basel capital adequacy rates drop by 8%.
On the other hand, among oil-exporting countries, capital adequacy rates are expected to remain above the 8% threshold unless it is Iran.
“Banks began 2020 with sometimes healthy balance sheets, yet the pandemic and severe disruption resulting from national and regional economic activity are major shocks that, differently, directly strengthen borrowers,” the IMF warned in its report.
“The crisis has exacerbated significant vulnerabilities in the region, adding up the highest debt, major financing needs, exposure to oil market volatility, and maximum unemployment and informality, all of which can hinder recovery and exacerbate scars,” he added. , the dangers of a worse-than-expected situation are significant. “
Governments have followed a number of measures in their monetary facilities sectors, however, they will have to move cautiously as they try to maintain monetary stability as they seek to put their savings back on track.
All of this is a bleak outlook for the giant economies in the regions.
Oil exporters in the region are expected to experience a contraction in their economies by 6. 6% this year, the IMF said, reflecting declining oil revenues and economic prices of blockades. budget deficits in 20 years.
Oil importers do not do so badly, with an expected contraction of 1% in their economies, however, they are sometimes worse off in dealing with the consequences of declining trade, reducing remittances and expanding task losses.
Overall, the region’s GDP is expected to decline by 4. 4% this year, much worse than the IMF’s estimated 3. 1% contraction in April. “With moderate global recovery, the dangers of problems continue to dominate the outlook as the pandemic continues in countries,” the report says.
In some areas, however, the scenario is not as bad as feared in the past. Gulf Cooperation Council countries (the six-member bloc that includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) are expected to see their economies contract by 6%, an improvement over the IMF’s 7. 1% contraction in June, even worse than the IMF’s 2. 7% contraction in April.
Equally concerned is the time it can take for the region to fully recover.
“The pandemic would possibly cause deeper and more persistent economic scarring than past recessions in the region, given the serious vulnerabilities that enter the crisis and its unprecedented nature,” Jihad Azour, director of the IMF’s Middle East and Central Asia department, said at a press conference. to publish the report. ” It is estimated that production in the region will not return to trend until after a decade. “
Dominic Dudley is an independent journalist with nearly two decades of experience in business, economic and political reporting in the Middle East, Africa, Asia and
Dominic Dudley is an independent journalist with nearly two decades of experience in business, economic and political reporting in the Middle East, Africa, Asia and Europe.