Transcript of the October 2022 Middle East and Central Asia Department Press Briefing
IMF News, October 13, 2022
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- Published: October 13, 2022
Regional growth outlook — MENA
- The region will grow at 5 percent this year, up from 4.1 percent in 2021.
- Growth is projected to slow to 3.6 percent next year.
- Oil exporters: growth projected at 5.2 percent this year, with an expected slowdown next year as "OPEC-plus production cuts, and oil price decline, and global demand is expected to slow."
- Emerging market and middle-income economies:
- Real GDP foreseen to grow at 4.9 percent this year, up from 3.6 percent last year.
- Growth expected to slow to 3.9 percent in 2023.
- These economies are facing a deep terms-of-trade shock, weakening global demand, and tighter financial conditions that "could translate into higher government service debt and worsening of debt dynamics."
- Low-income countries: growth will remain weak at just 0.8 percent this year.
Regional inflation — MENA
- Headline inflation in MENA is projected at 14.2 percent, on average, for this year, and is "expected to remain elevated in 2023."
- Inflation "continued to increase and has become now broad-based."
Caucasus and Central Asia (CCA) — outlook and inflation
- CCA growth for 2022 revised up by 1.2 percentage points to 3.8 percent this year (relative to April forecast).
- Growth drivers: "smaller than expected contraction in Russia, robust foreign exchange inflows, as well as resilient trade."
- Medium-term growth projected to slow to 3.5 percent, "significantly below the region’s historical average of almost 7 percent."
- Headline inflation projected at 12.9 percent this year, and 10.5 percent in 2023, despite recent monetary policy tightening.
Key risks highlighted
- Persistently high commodity prices and pervasive food shortages, with "low strategic food reserves" and rising fertilizer costs risking 2023 agricultural harvests, reducing food security and potentially raising social tensions.
- Tighter-than-expected global financial conditions that could trigger financial instability and debt distress.
- Broadening inflation that may require deeper disinflationary policies with potentially higher-than-expected costs.
- Continued high uncertainty from the war in Ukraine, with spillovers to trade, tourism, remittances, and financial channels.
Policy priorities and recommendations
- Restore price stability while protecting the vulnerable.
- Preserve fiscal sustainability while maintaining social stability.
- Ensure food and energy security and manage lingering pandemic-related risks.
- Press ahead with structural reforms to bolster growth, diversify and transform economies, improve resilience and sustainability, and increase inclusiveness.
- Enhance social protection systems by targeting support to the most vulnerable rather than untargeted subsidies.
- Give space to the private sector to drive investment and job creation; state should support rather than compete with private activity.
- Monetary policy, fiscal discipline, and strengthened social protection are emphasized as central pillars of programs.
Country-specific notes and IMF engagement
- Egypt:
- IMF–Egypt cooperation described as "very strong" since 2016 with two prior programs and a social protection pillar.
- During COVID the Fund provided two tranches totaling $8.8 billion.
- Negotiations for a new program have started and are "progressing"; "as soon as we reach staff level agreement, we will inform you about the size and the content of this agreement."
- Program pillars: protecting from exogenous shocks, adapting monetary policy, maintaining fiscal discipline, strengthening social protection (Takaful and Karama), and structural reforms to boost private-sector-led growth.
- Tunisia:
- IMF provided one and a half billion dollars over the last two years: "750 immediately after the COVID shock, and another one of similar amount, last year, with the SDR allocations."
- Negotiations for a new program are ongoing; the program "is a homegrown program" with social dialogue and prioritization of reforms to address fiscal imbalances and inflation.
- Central bank measures (interest rate adjustments and liquidity provision) noted as part of addressing inflation.
- Qatar:
- Economic activity benefited from World Cup-related investment and higher oil and gas prices; expected continued improvement in growth next year.
- GCC countries generally have lower inflation impacts due to consumption patterns and continued subsidies for some commodities.
- Qatar expected to increase gas production and remain a leading LNG exporter.
- Somalia:
- Reached HIPC decision point in 2020; work toward the completion point continues.
- Challenges include COVID, climate shocks (droughts and floods), and delayed political processes.
- IMF recommends more grants to address acute food security needs.
- Expectation to reach completion point "some time at end of 2023" if progress continues.
- Sudan:
- IMF engagement not suspended; limited engagement continues.
- Economic and social situation has deteriorated; ECF expected to expire at the end of 2022.
- HIPC decision point achieved; completion point still requires reforms and measures amid food security and climate shocks.
- Lebanon:
- Staff-level agreement reached after protracted negotiations to address "one of the most acute and severe crisis for Lebanon in a century."
- Key required measures: pass a budget; restore trust and confidence via transparency and anti-corruption measures (e.g., Bank Secrecy Law reforms); address financial sector losses that weigh on the state balance sheet.
- Progress has been made but remains slow; IMF urges acceleration to enable program effectiveness and international support.
- Jordan:
- Program adjusted since 2020 to provide flexibility during COVID.
- Implemented important reforms to maintain macro stability and control inflation.
- Priorities: accelerate structural reforms, reduce labor and energy costs, improve fiscal management, and undertake transformative projects to reduce unemployment and boost private-sector-led growth.
- Pakistan:
- IMF has an extended program and recently completed a review that provided $1.2 billion.
- IMF awaiting World Bank and UNDP assessments of flood damages to update economic and fiscal implications.
- IMF encourages moving from untargeted subsidies to targeted social protection to better protect vulnerable populations.
- Mission expected in November to prepare the next review.
IMF financing and support in the region
- Since the outbreak of the COVID crisis, the IMF has supported MENA and CCA, plus Afghanistan and Pakistan, with US$21.3 billion in financing.
- In 2021, the SDR allocation provided an additional boost to reserves by US$49 billion.
- The IMF is scaling up technical assistance and policy advice for MENA and CCA, including a new center in Kazakhstan.
- Regional Economic Outlook (REO) launch events: "we’ll explore the outlook" at the REO launch in Dubai later this month and in Uzbekistan in early November.
- The Regional Economic Outlook report will be published on October 31st.
Transcript of the October 2022 Middle East and Central Asia Department Press Briefing