DUBAI, United Arab Emirates – The International Monetary Fund has raised its economic outlook for Middle East and North African growth by 1.2 percentage points in 2020 to a total contraction of 3.8%, showing that despite some progress since the start of the coronavirus pandemic, this has been a brutal year anyway.
The recovery will be varied and largely based on countries’ investments and strategies for vaccine distribution. But there is one bright spot in particular for the Gulf States: the lifting of Qatar’s political and economic blockade by other GCC countries, Jihad Azour, IMF director for Middle East and Central Asia, told CNBC on Wednesday.
While the full details of the reconciliation agreement between blocking states – Saudi Arabia, the United Arab Emirates, Bahrain and Egypt – and Qatar are not publicly known, Azour told CNBC’s Hadley Gamble that “ any improvement in terms of opening borders will improving the economy relationship offers additional growth potential. ”
“This will of course improve trade, especially at rates in goods and services,” he added. “It will lower procurement costs, for example for Qatar, it will also help airlines by reducing costs. Therefore, there is always benefit from improving economic relations, especially as we are now entering a new phase of globalization. . ”
A security guard is checking the temperature of a man who arrives at a shopping center in the Saudi capital of Riyadh on May 4, 2020, as shopping malls are reopening after authorities begin partial unlocking.
Fayez Nureldine | AFP | Getty Images
The news, which saw an end to a dramatic 3 ½ year dispute, is also likely to be a boon to investment, Azour said. “I think this is good for business in the short term, but also in the long term, because it offers more room for investors. And this will be appreciated.”
Qatar’s financial hub alone is aiming to attract $ 25 billion in foreign direct investment by 2022 as a result of the rapprochement, CNBC reported in January. Airlines, manufacturing and food production are among the other areas likely to receive a major boost.
Vaccine strategy will be crucial
In the broader region, the improvement in outlook was based on “ stronger than expected performance of oil exporters, as the absence of the second wave boosted non-oil activity in some countries, and the impact of the first wave was lower than expected, ”the IMF wrote in its regional outlook.
Still, the outlook for recovery is patchy and will depend heavily on the government’s vaccination plans. This ranges “from countries with very well diversified vaccine contracts and manufacturing capacity to fragile and conflict-affected states largely dependent on COVAX,” Azour wrote in his report. COVAX is a global program led by an international vaccine alliance and the WHO, established to ensure fair access to vaccines for every country in the world.
The differences are clear: rich Middle Eastern states such as the UAE and Israel are on track to vaccinate half of their population by March and boast the fastest vaccination campaigns in the world, while poorer countries and areas like Palestine are are largely dependent on COVAX. and have not yet received any vaccines for their general population.
“Our analysis shows that countries that have invested heavily in accelerating and accelerating vaccination will see a faster recovery,” said Azour.
Countries that have applied stronger fiscal responses to the Covid-19 crisis “are also expected to have a stronger recovery in 2021, helped by a shallower low in 2020,” the IMF report wrote.
It added that while there are several vaccines on the market now, the battle is far from over.
“While vaccines shine a light of hope, the road will be long and winding,” the report said. “In the short term, the key priority remains to ensure that health systems are adequately resourced, including funding the purchase and distribution of vaccines.”