## Transcript of Press Briefing: Middle East and Central Asia Department Regional Economic Outlook, October 2024

_IMF News, October 24, 2024_

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## Bibliographic details
- Published: October 24, 2024

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### 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*

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## References

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