Transcript of Middle East and Central Asia April 2024 Press Briefing

IMF News, April 18, 2024

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• Published: April 18, 2024

Regional growth outlook — MENA and CCA

• MENA growth projected to improve to 2.7 percent in 2024, from 1.9 percent in 2023.
• The 2024 MENA projection reflects a 0.7 percent downgrade from October 2023 projections due to conflict in Sudan and Gaza and oil production cuts.
• MENA growth projected to strengthen to 4.2 percent in 2025 as temporary factors fade.
• CCA growth projected at 3.9 percent in 2024 and 4.8 percent in 2025.
• Drivers noted:
  • GCC: non-hydrocarbon activity is the main contributor to growth as countries pursue economic diversification plans.
  • CCA: loosening of macro policies, strong domestic demand, idiosyncratic factors (such as oil production increase) support resilience.
  • Trade diversion following the onset of the war in Ukraine has reshaped trade flows in the CCA.

Inflation developments

• MENA:
  • Average inflation forecast to ease to 14.5 percent in 2024 and 12.4 percent in 2025.
  • These numbers partly reflect high inflation in Egypt and Sudan.
  • Excluding Egypt and Sudan, inflation projected to average 8.8 percent in 2024 and 7.8 percent in 2025.
  • Around one third of economies are now close to or even below historical average inflation.
  • Monetary tightening cycles appear to have ended in most economies.
• CCA:
  • Inflation forecast to ease from 7.7 percent in 2024 to 7.1 percent in 2025.
  • Majority of country inflation is below or close to targets, providing room for some monetary easing.

Vulnerabilities and downside risks

• Key regional downside risks for MENA:
  • Conflicts in Gaza and Israel, with risks of escalation or protracted conflict.
  • Red Sea shipping disruptions and oil price vulnerability for oil exporters.
  • High debt and financing needs for emerging and middle-income countries.
  • Recurrent climate shocks affecting low-income countries.
• Key risks for CCA:
  • Slowdown in trading partners.
  • Worsening geoeconomic conditions related to the war in Ukraine.
• Conflict impacts:
  • Conflict can cause large and persistent output losses and potential spillovers to other countries.
  • Red Sea tensions led to a decline of trade by more than half and a decline of Egyptian Suez Canal revenues by about two thirds (as cited in the briefing).
• Specific figures and observations raised in Q&A:
  • Questioner referenced an "18.3 percent GDP contraction for Sudan" (as posed during the briefing).

Policy guidance and priorities

• Balance priorities in an uncertain time:
  • Safeguard macroeconomic stability and sustainability while improving medium-term growth prospects.
• Monetary policy:
  • Remain vigilant; be cautious of premature or excessive easing.
  • Strengthen monetary policy frameworks, increase transparency, and ensure central bank independence.
• Fiscal policy and debt management:
  • Where public sector debt levels are elevated, fiscal policies and active debt management should decisively bring debt down.
  • Tailor policies carefully by country given market differences.
• Structural reforms and resilience:
  • Accelerate reforms to fortify fundamentals, including strengthening institutions.
  • Seize opportunities from new trade corridors by reducing trade barriers, diversifying products and markets, and improving infrastructure.

IMF engagement, financing, and capacity development

• Financing provided since the onset of the Pandemic: more than $40 billion.
• Financing since the start of 2023: $16 billion (including to Egypt, Jordan, Mauritania, Morocco, and Somalia).
• Policy traction and fragile states:
  • Increasing policy traction with Middle East and Central Asia countries outside programs.
  • Scaling up implementation of the Fund’s strategy for fragile and conflict states.
• Technical assistance and capacity development:
  • About 350 technical assistance and capacity development projects in the region.
  • Capacity development budget increased by 38 percent in the last two years, reaching $45 million in fiscal year 2024.

Country highlights and program-related points raised in briefing

• Egypt:
  • Multiple references to program support and reviews; loan amount discussed in the briefing as increased from "five to $8 billion" and elsewhere described as improved from "$3 to $8 billion."
  • Tranche disbursements occur upon Executive Directors’ approval.
  • Exchange rate unification/flexibility and allowing the exchange rate to reflect real prices were emphasized as tools to protect the economy and attract private sector activity.
  • Priorities cited: tackle inflation, accelerate economic transformation, enhance private sector role, redesign public sector role, increase transparency on large public investment projects, and maintain social protection for vulnerable groups.
  • Debt dynamics noted: debt expected to start declining from 92.4 percent (2024) to 82.6 percent (subsequent year projection mentioned in the briefing).
• Sudan:
  • The briefing noted severe humanitarian and economic distress due to recent escalation of conflict; the Fund remains engaged but re-engagement is constrained while conflict persists.
  • Historical engagement: a two years-ago decision point addressing about $56 billion of debt in arrears; Completion Point plans were interrupted by renewed conflict.
  • The Fund stands ready to reengage on debt relief and reconstruction when conditions permit.
• Pakistan:
  • A program initiated ten months ago achieved milestones improving stability and rebuilding buffers; last review successful.
  • Authorities have expressed interest in a new program; priority reforms include fiscal consolidation through revenue mobilization, energy sector reform, and measures to boost potential growth by improving the business environment and private sector space.
  • IMF view: the package of reforms matters more than program size; Fund support is ready when requested.
• Jordan:
  • Authorities implemented measures reducing the deficit and improving stability; credit ratings improved.
  • Program support aimed at promoting growth and helping external financing; international support remains important given refugee-related fiscal pressures.
• Caucasus and Central Asia (CCA) energy and stability role:
  • CCA countries have remained resilient and adjusted to global changes including trade-route shifts.
  • Energy markets remain well supplied; volatility exists with geopolitical events but supply capacity broadly covers shortages.

Transcript of Middle East and Central Asia April 2024 Press Briefing — April 18, 2024, IMF Communications Department.

References

• https://www.imf.org/en/about/senior-officials/bios/jihad-azour
• Israel and the IMF
• Sudan and the IMF
• Arab Republic of Egypt and the IMF
• Jordan and the IMF
• Kingdom of Bahrain and the IMF
• Kuwait and the IMF
• Oman and the IMF
• Pakistan and the IMF
• Qatar and the IMF
• Republic of Azerbaijan and the IMF
• Republic of Yemen and the IMF
• Saudi Arabia and the IMF
• Somalia and the IMF
• United Arab Emirates and the IMF
• Transcripts
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