By Suban Abdulla, WASHINGTON DC
The
International Monetary Fund (IMF) has issued a stark warning on Sunday that
COVID-19 uncertainty could hinder an economic rebound and increase debt in
around 30 countries. 
The IMF said 'early inoculators', which include the oil-rich Gulf countries, Kazakhstan, and Morocco, will reach 2019 GDP levels next year, while recovery to those levels is expected to take one year more for other countries
It comes after the organisation marked up its economic outlook
for the Middle East, North Africa, Pakistan and Afghanistan in its latest
report.
Its revised 2020 figure now shows just a 3.4% contraction last
year.
Meanwhile, it projects real gross domestic product (GDP) growth
in the region to pick up to 4% in 2021 — an upgrade of 0.9 percentage point
relative to October 2020.
Other nations in the region will fare even worse. IMF predicts
that the damage done by the coronavirus crisis will drag on and cause economic
harm for many years in countries with high inflation rates and lasting wars
like Yemen, Libya, Sudan and Lebanon.
"Although comfortable reserve levels provide support for
the region’s emerging markets, vulnerabilities for countries with elevated
external debt and limited fiscal space are higher," the IMF said.
While there was economic rebound in the region in the third
quarter of 2020 as COVID restrictions were relaxed, it said that the outlook
and recovery remain uncertain.
IMF pointed to vaccine inequity, reliance on heavily affected
sectors like tourism as well as countries’ fiscal policy as contributing
factors.
As a result it urged the countries in the region to curb their
financing requirements, amid rising government debt, exacerbated by the
coronavirus crisis, threatens recovery prospects.
It projects that financing needs will increase in the next two
years years, with emerging markets in the region likely to need around $1.1tn
(£803bn) in 2021-2022 compared to $784bn in 2018-2019.
Growth for the region's oil exporters was
boosted by a boom for commodities and rise in oil prices.
Brent (BZ=F)
hit $65 a barrel in March this year — it rose over 240% in the last 12 months,
while Crude futures (CL=F)
stood at $63 per barrel. Prices across both benchmarks are expected to
dip.
Despite expected oil price dips through to
the end of 2022, the surge from last year's all-time lows is
boosting countries such as the United Arab Emirates and Saudi Arabia, which
have both bolstered its vaccination rollouts.
But, lower demand and slump in oil prices caused fiscal deficits
to widened in Middle East and North Africa to 10.1% of GDP in 2020 from 3.8% in
2019, IMF said.
The pace of actual demand recovery, based on coronavirus
inoculation rates and the degree to which sectors like travel and employment
return to pre-pandemic norms, will remain an important uncertainty on the
demand side.
Additionally, this recovery in activity reflects a
"carryover from the last quarter of 2020" and is amplified by the
expected pickup in activity in the second half of 2021.
"Oil prices have recovered since the last quarter of 2020,
reflecting improved global demand, combined with the OPEC+ agreements to extend
oil production cuts and Saudi Arabia's announcement of additional voluntary
production cuts," the Fund said.
The International Monetary Fund (IMF) has issued a stark warning on
Sunday that COVID-19 uncertainty could hinder an economic rebound and increase
debt in around 30 countries.
It comes after the organisation marked up its economic outlook for the
Middle East, North Africa, Pakistan and Afghanistan in its latest report.
Its revised 2020 figure now shows just a 3.4% contraction last year.
Meanwhile, it projects real gross domestic product (GDP) growth in the
region to pick up to 4% in 2021 — an upgrade of 0.9 percentage point relative
to October 2020.
Other nations in the region will fare even worse. IMF predicts that the
damage done by the coronavirus crisis will drag on and cause economic harm for
many years in countries with high inflation rates and lasting wars like Yemen,
Libya, Sudan and Lebanon.
"Although comfortable reserve levels provide support for the
region’s emerging markets, vulnerabilities for countries with elevated external
debt and limited fiscal space are higher," the IMF said.
While there was economic rebound in the region in the third quarter of
2020 as COVID restrictions were relaxed, it said that the outlook and recovery
remain uncertain.
IMF pointed to vaccine inequity, reliance on heavily affected sectors
like tourism as well as countries’ fiscal policy as contributing factors.
As a result it urged the countries in the region to curb their financing
requirements, amid rising government debt, exacerbated by the coronavirus
crisis, threatens recovery prospects.
It projects that financing needs will increase in the next two years
years, with emerging markets in the region likely to need around $1.1tn
(£803bn) in 2021-2022 compared to $784bn in 2018-2019.
Growth for the region's oil exporters was boosted by a boom for
commodities and rise in oil prices.
Brent (BZ=F)
hit $65 a barrel in March this year — it rose over 240% in the last 12 months,
while Crude futures (CL=F)
stood at $63 per barrel. Prices across both benchmarks are expected to
dip.
Despite expected oil
price dips through to the end of 2022, the surge from last year's
all-time lows is boosting countries such as the United Arab Emirates and Saudi
Arabia, which have both bolstered its vaccination rollouts.
But, lower demand and slump in oil prices caused fiscal deficits to
widened in Middle East and North Africa to 10.1% of GDP in 2020 from 3.8% in
2019, IMF said.
The pace of actual demand recovery, based on coronavirus inoculation
rates and the degree to which sectors like travel and employment return to
pre-pandemic norms, will remain an important uncertainty on the demand side.
Additionally, this recovery in activity reflects a "carryover from
the last quarter of 2020" and is amplified by the expected pickup in
activity in the second half of 2021.
"Oil prices have recovered since the last quarter of 2020,
reflecting improved global demand, combined with the OPEC+ agreements to extend
oil production cuts and Saudi Arabia's announcement of additional voluntary
production cuts," the Fund said.
It added that "early inoculators" for oil-rich Gulf nations,
Kazakhstan and Morocco, will reach 2019 GDP levels next year. The IMF expects
it will take other countries one year more to reach recovery to those
levels.
"Recovery has started, but recovery has started in an uneven,
uncertain way," Jihad Azour, director of the Middle East and Central Asia
Department at the IMF, told Reuters.
Meanwhile, GDP in emerging Asian economies, excluding China, will
decline nearly 8% by 2024 compared to pre-COVID projections, according to the
IMF.
While, Latin America and the Caribbean will take a 6% hit, sub-Saharan
Africa will decrease more than 5% compared to pre-pandemic trends.
"We are a year into the crisis and recovery is back, but it is a
divergent recovery,” Azour added. "We are at turning point. ...
vaccination policy is economic policy."
There have been similar concerns at global
organisations over the issue of vaccine inequity in poorer nations at the back
of the queue with little fiscal firepower.
On Saturday, the World Bank said that it will have
committed $2bn in aid by the end of April for coronavirus
vaccine purchases, including development and manufacturing in some 40
developing countries.
Axel van Trotsenburg, World Bank's managing director of
operations, told a forum that the money is part of around $12bn the
organisation has set aside for vaccine purposes in low-and middle-income
nations.
The organisation's president David Malpass said the bank
expected this to expand to $4bn across 50 countries by mid-2021, in separate remarks to the lender's
development committee.
However, health officials warned developing countries could lose
out if the vaccination pace didn't pick up, amid the spread of the coronavirus
and issues surrounding the vaccines meant to stop it.
World Health Organisation (WHO) director general Tedros Adhanom
Ghebreyesus called for political will to bolster production of COVID-19 jabs
and share supplies.
He called the failure to agree on a plan to waive intellectual
property under the rules of the World Trade Organisation (WTO), the
"elephant in the room." He added that the WTO waiver was meant for
emergencies like the COVID crisis.
"We haven’t seen any emergency like this in our lifetime.
If we cannot use it now, then when are we going to use it?” the WHO chief said.
"The mother of all these bottlenecks is lack of political will." - Reuters
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