Transcript of Press Briefing: Middle East and Central Asia Department Regional Economic Outlook, October 2024
IMF News, October 24, 2024
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- Published: October 24, 2024
Regional outlook — headline findings
- 2024 regional growth projected at 2.1 percent, a downgrade revision of 0.6 percent from the April WEO forecast, largely due to the impact of the conflict and the prolonged OPEC+ production cuts.
- If the conflict and voluntary oil production cuts gradually abate, anticipated stronger growth of 4 percent in 2025; uncertainty about timing remains very high.
- Since early 2020, the Fund has approved $47.7 billion in financing to countries across MENA and CCA and carried out capacity development projects for 31 countries only in the last fiscal years.
Growth projections by subregion and country groups
- MENA overall:
- 2024 growth: 2.1 percent (regional headline).
- 2025 baseline (if shocks abate): 4 percent.
- MENA oil exporters:
- 2024: 2.3 percent.
- 2025 (contingent on expiration of voluntary oil production cuts): 4 percent.
- MENA oil importers:
- 2024: 1.5 percent.
- 2025 (assuming conflicts ease): 3.9 percent.
- Caucasus and Central Asia (CCA):
- 2024 revised up to 4.3 percent.
- 2025 expected: 4.5 percent.
- Note: Some economies show tentative signs of slower trade and remittance inflows; subdued oil production weighs on medium-term prospects for CCA oil exporters; growth for oil importers depends on reform implementation.
- GCC region and Saudi Arabia:
- GCC aggregate: growth about 1.2 percent in 2024 and improving to 4.2 percent in 25.
- Saudi Arabia: 2024 growth expected 1.5 percent (improvement from minus 0.2 percent in prior year); 2025 expected 4.6 percent.
- Pakistan:
- 2024: projected 2.4 percent (compared to minus 0.2 percent last year).
- 2025: projected 3.2 percent.
- Inflation: down from 29 percent last year to 12.6 percent this year; expected 10.6 percent next year.
- Kazakhstan:
- 2024: projected 3.5 percent.
- 2025: projected 4.6 percent.
Inflation and price developments
- Disinflation is continuing across both MENA and CCA with headline inflation coming down significantly compared to peak levels over the past two years.
- Inflation remains elevated in a few cases due to country-specific challenges.
- Example: Pakistan inflation trajectory cited as 29 percent (last year) → 12.6 percent (this year) → 10.6 percent (next year).
- Egypt: inflation has reached 35 percent (last year) and is a central policy concern.
Channels of conflict transmission and recent impacts
- Main transmission channels of the recent conflict escalation:
- Output losses (severe contractions for epicenter countries).
- Tourism declines.
- Trade disruptions (notably Suez Canal revenues for Egypt).
- Potential refugee and migration flows.
- Oil and gas market volatility.
- Financial market effects and social unrest.
- Country-specific impacts mentioned:
- Gaza, West Bank, Lebanon: severely affected; Lebanon with more than 1.2 million people displaced (almost 25 percent of the population); broad destruction of livelihoods (agriculture) and severe drops in economic activity under high inflation.
- Egypt: main channel is trade via Suez Canal — “reduction in trade volume going through the Suez Canal has affected revenues by more than 60 to 70 percent on average for the Suez Canal, which would represent between 4 and a half to , $5 billion of loss in revenues.” Tourism impact in Egypt described as “almost muted.”
- Jordan: impact mainly on tourism and Aqaba port; inflation low at 1.8 percent this year.
- Syria: affected but limited information available.
Medium-term growth prospects and reform priorities
- Medium-term growth prospects have faded over the past two decades and are now relatively weak in many economies.
- Required steady reform implementation; priority areas for MENA and CCA include:
- Governance improvement.
- Job creation, especially for women and youth.
- Investment promotion.
- Financial development.
- Achieving stronger, more resilient growth will help:
- Foster job creation and greater inclusion.
- Reduce elevated debt levels.
- Enable progress toward social spending goals.
Fiscal, debt, and financing challenges
- Regional financing needs for this year: $286 billion (almost $6 billion higher for the whole region compared to last year).
- Debt challenges addressed on three levels:
- Macro stability: need for inclusive but sustained fiscal consolidations to reduce macro risk and strengthen revenue-raising capacity.
- Financing access: securing sufficient financing given elevated regional needs.
- Cost of debt service: higher interest rates raise debt service burdens.
- Increased reliance on local markets for financing local debt noted; importance of clear medium-term reform agendas to broaden finance space and provide investor comfort.
Risks and scenarios — upside and downside considerations
- Principal risks identified:
- Further escalation of conflict in the MENA region (main immediate downside risk).
- Possibility of prolonged conflict in Sudan.
- Increased geoeconomic fragmentation.
- Volatility in commodity prices (especially for oil exporters).
- High debt and financing needs for emerging markets.
- Recurrent climate shocks.
- CCA-specific risks:
- Potential financial instability from sudden shifts in trade and financial flows.
- The briefing notes that the recent intensification of conflict in Lebanon has increased uncertainty; the current analysis does not yet fully factor in the most recent developments and downside risks could be material depending on escalation severity.
Policy guidance and IMF engagement
- Policy priorities emphasized by the IMF team:
- Preserve macroeconomic stability (exchange rate flexibility and monetary policy to curb inflation).
- Protect vulnerable populations via targeted social programs (examples cited: Takaful and Karama in Egypt).
- Pursue growth-friendly fiscal consolidation and structural reforms (SOE reform, business environment improvements, export orientation, private sector space).
- Continue financing and technical support where requested.
- IMF operational engagement:
- The Fund increased the size of Egypt’s program from $3 billion to $8 billion in the last review.
- Egypt also received large bilateral investment pledges (cited as “35, 34 billion dollars of investment from UAE”) and additional financing from multilateral and bilateral partners (World Bank, EU).
- The IMF stands ready to continue engagement and monitoring, updating assessments as the situation evolves.
Select country notes and operational remarks
- Egypt:
- Partially affected by the conflict; main impact via Suez Canal revenue losses.
- Program aims: stability (exchange rate flexibility), inflation reduction, growth generation via private-sector space and SOE reforms.
- IMF increased program financing (from $3 billion to $8 billion) at the April review.
- Social protection measures emphasized to shield vulnerable households when fiscal measures are introduced.
- Pakistan:
- Reforms aim to achieve fiscal sustainability (revenue mobilization, SOE reform) and attract FDI; monetary policy helping lower inflation and improve external balance.
- Jordan:
- Resilient performance despite tensions; inflation low at 1.8 percent; revenues improved in recent years supporting stability.
- CCA / Kazakhstan:
- CCA has shown robust growth; Kazakhstan projected 3.5 percent in 2024 and 4.6 percent in 2025, aided by energy investments and non-oil sector performance.
- GCC and Saudi Arabia:
- Non-oil sector development is the main driver of resilience and future growth; reform agendas (Vision 2030) and new priorities (technology, AI, climate) are attracting investment.
Events and follow-up
- IMF planned complementary events:
- Official regional outlook launch in Dubai on October 31.
- A session on medium-term growth priorities (including structural reform discussions) planned the next day at 3pm.
Transcript of Press Briefing: Middle East and Central Asia Department Regional Economic Outlook, October 24, 2024 — IMF Communications Department