Regional Economic Outlook: Middle East and Central Asia: Mounting Challenges, Decisive Times

Regional Economic Outlook, October 31, 2022

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Bibliographic details

• Published: October 31, 2022
• Series: Regional Economic Outlook
• DOI: https://doi.org/10.5089/9798400220654.086

Summary and key findings

• Economies in the Middle East and Central Asia face a confluence of shocks: a global slowdown, high and volatile food and energy prices, faster and stronger than expected tightening of financial conditions, and the risk of fragmentation.
• Emerging market and middle-income economies (EM&MIs) and low-income countries (LICs) in the region are being hit hard, with many facing curtailed access to market financing.
• Oil-exporting countries are being buffered by still-high energy prices.
• The adverse impact of Russia’s war in Ukraine on the Caucasus and Central Asia (CCA) has thus far been milder than expected, but the CCA’s strong ties to Russia entail substantial risks to the region’s outlook.
• The most urgent policy challenge for all countries is to tackle the cost-of-living crisis by:
  • restoring price stability,
  • protecting vulnerable groups through targeted support,
  • ensuring food security.
• Limited policy space in many countries raises the urgency of structural reforms to bolster economic growth and to transform economies to become more resilient, sustainable, diversified, and inclusive.

Regional vulnerabilities and differentiated impacts

• EM&MIs and LICs:
  • Face pronounced policy trade-offs between addressing the cost-of-living crisis and preserving debt sustainability and financial stability.
  • Many are experiencing curtailed access to market financing.
• Oil exporters:
  • Continue to receive buffering effects from still-high energy prices.
  • Have the opportunity to maximize the benefits of the oil windfall by building buffers and advancing diversification plans.
• Caucasus and Central Asia (CCA):
  • Initial spillovers from Russia’s war in Ukraine have been milder than expected to date.
  • The CCA should carefully assess the magnitude and durability of these spillovers and adjust their policy mix accordingly.

Policy recommendations and priorities

• Restore price stability as a central objective to address the cost-of-living crisis.
• Protect vulnerable groups with targeted support measures.
• Ensure food security through appropriate policies and interventions.
• For EM&MIs and LICs, balance near-term social support with debt sustainability and financial stability considerations.
• For oil exporters, use the current windfall to build fiscal and external buffers and accelerate economic diversification.
• For CCA countries, monitor spillover developments from the war in Ukraine and adjust policies based on the assessed persistence and severity of shocks.
• Undertake structural reforms where policy space is limited to strengthen long-term growth, resilience, sustainability, diversification, and inclusiveness.

Publication and metadata

• Publication title: Regional Economic Outlook: Middle East and Central Asia: Mounting Challenges, Decisive Times
• Date: October 31, 2022
• Pages: 59
• DOI: https://doi.org/10.5089/9798400220654.086
• Stock No: REOMCDEA2022002
• ISBN: 9798400220654
• ISSN: 2707-8086
• Subject: Financial crises, International organization
• Keywords: COVID-19, financial risks, financing conditions, global commodity prices, inequality, inflation, poverty, war in Ukraine

Regional Economic Outlook: Middle East and Central Asia: Mounting Challenges, Decisive Times (International Monetary Fund), October 31, 2022.