## January 2024 Regional Economic Outlook Update — “Middle East and North Africa: Conflict Compounding Economic Challenges” — Press Remarks

## Source details

**Canonical URL:** [January 2024 Regional Economic Outlook Update — “Middle East and North Africa: Conflict Compounding Economic Challenges” — Press Remarks](https://www.imf.org/-/media/files/publications/reo/mcd-cca/2024/update/january/english/press-remarks-eng.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/reo/mcd-cca/2024/update/january/english/press-remarks-eng.pdf.md)
- [Structured JSON version](/-/media/files/publications/reo/mcd-cca/2024/update/january/english/press-remarks-eng.pdf.json)

---

### Context
- The conflict in Gaza and Israel has adverse economic consequences across the MENA region, compounding preexisting challenges: high debt levels and inflation that "has not yet been sufficiently brought down in many economies."
- The 2024 growth projection for the MENA region is revised downward by 0.5 percentage point from October forecasts.
- The IMF now projects GDP to grow by 2.9 percent in 2024, following already weak growth of 2.0 percent in 2023.
- Key factors weighing on activity:
  - The conflict in Gaza and Israel:
    - The IMF estimates that growth in West Bank and Gaza contracted to about –6 percent in 2023, a downgrade of 9 percentage points from October’s projections.
    - Neighboring countries—Egypt, Lebanon, and Jordan—also face a challenging outlook.
    - Heightened security in the Red Sea raises concerns about impacts on trade and shipping costs.
  - Oil production cuts by several oil exporters are weighing on overall GDP growth (especially in the GCC), even as non-hydrocarbon activity remains robust.
  - Tight policy settings: Restrictive macro policies remain essential to bring down high debt and elevated inflation in certain countries.
- Inflation development:
  - An encouraging development is that inflation has continued to decline in most MENA economies in line with global trends, except in some parts of the region due to country-specific challenges.

### Risks
- Since last October, uncertainty and downside risks for the region’s economies have increased sharply, with the duration of the conflict and scope for escalation still uncertain.
- The heightened security situation in the Red Sea could entail a significant hit to shipping, regional trade, and possibly undersea internet cables.
- Potential escalation could cause a more severe or persistent negative impact on tourism.
- Higher energy bills and borrowing costs from an unexpected tightening of regional financing conditions could hold back growth.
- Fiscal pressures:
  - Fiscal spending could rise to support vulnerable households and displaced families as well as to bolster security, particularly for economies close to the conflict.

### Policy Response
- Policy responses should be calibrated to countries’ exposure to the conflict, existing vulnerabilities, and policy space.
- Guidance by situation:
  - Where the impact of the conflict is acute or risks are elevated: crisis management and precautionary policies will be critical.
  - Elsewhere: countries need to continue to fortify safeguards.
- Specific policy priorities:
  - Monetary policy should remain focused on price stability.
  - Fiscal policy should be tailored to country needs and available fiscal space.
  - Structural reforms to boost growth and strengthen resilience in both the near and longer terms remain critical.

### What the IMF Is Doing
- The IMF is ready and committed to supporting the region with policy advice, technical assistance, and financing to help buffer against shocks and ease necessary adjustments.
- Financing and program actions:
  - Approved $27 billion in financing to the MENA region since early 2020.
  - In Jordan, a new four-year Extended Fund Facility was recently approved, unlocking $1.2bn.
  - Since the start of 2023, the IMF approved programs for Egypt, Mauritania, and Morocco.
  - Somalia successfully reached the Completion Point under the HIPC initiative.
- Institutional presence:
  - The IMF has increased its local presence by reopening its Middle East Regional Technical Assistance Center and setting up a new regional office in Riyadh, Saudi Arabia, to further strengthen engagement and partnership with the region.

*Press Remarks by Jihad Azour, Director, Middle East and Central Asia Department, International Monetary Fund — January 31, 2024.*

---


_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2024/update/january/english/press-remarks-eng.pdf_