WASHINGTON: Middle East and North Africa policy makers need to remain accommodative with fiscal and monetary measures, while countries can accelerate their economic recovery from the Covid-19 pandemic by investing in green infrastructure, technology and digitalisation, a senior International Monetary Fund official said.
The recovery across countries is uneven and hinges on the vaccination roll out, containment measures and the ability of countries to limit the scarring from the pandemic, Jihad Azour, the director of the Middle East and Central Asia department at the IMF said in an interview with The National, report agencies.“We see certain improvements in some of the fundamentals like oil price, the level of low interest rates, some countries bouncing back, but the fog of uncertainties of the second and third wave of the pandemic … are casting a shadow on this year,” Mr Azour said.
“We need to accelerate the recovery … because to regain the levels of pre-Covid we need still more effort. We will not regain this before 2022 and we don’t want to have a lost decade whereby we will be slower with reforms and slower in recovery.”
Mr Azour said 2021 is a year where the region finds itself in a “race between the virus and the vaccine, and a recovery … will hinge on three important factors; access to vaccines in terms of inoculation, the strength of the policy response; fiscal monetary all that has been deployed over the last few months and the impact of the global economy on the region, on the oil price, and the global outlook on interest rates”.
The economies of the Mena region are projected to grow 3.1 per cent this year after contracting 3.8 per cent in 2020. Countries that have accelerated the vaccination could benefit from an additional 0.3 or 0.4 per cent growth this year. Those lagging could lose 0.3 per cent or 0.5 per cent.
For instance, Mr Azour said despite the challenges Palestinians faced in the first wave of the pandemic and the second, their economy, which relies largely on donor aid, managed the first wave “in a relatively good way”. But he added, “it’s important for Palestine to get access to the vaccine because we see the positive impact of vaccination in reducing the spreading of the virus and allowing the economy to recover”.
Lebanon whose economy contracted 25 per cent in 2020, may see an additional contraction of 9 per cent this year depending on the capacity of forming a cabinet and implementing needed reforms, as it battles the pandemic, Mr Azour said. Iran, which has the highest number of Covid-19 infections in the region at over 1.4 million, may see an economic recovery of between 3 to 3.3 per cent growth in 2021, after contracting 5.7 per cent last year. While vaccinations are key to kickstarting growth and revitalising economies, continued fiscal and monetary support is critical to preventing socio-economic disparities from widening, protecting businesses and mitigating rising unemployment. Arab countries are projected to have the equivalent of one million fewer full-time jobs this year, compared to pre-crisis levels, according to the International Labour Organisation.