The I M F on the economic outlook in the MENA region

Projecting a growth rate of 2.9% in 2024 for the region (down 0.5 percentage points from October 2023 projections) assuming conflicts subside, after the first quarter of 2024, the IMF estimates on the other hand, that in the event of escalation or propagation “uncertainty would increase and the repercussions of the conflict via different transmission channels, starting with tourism, foreign direct investments and the energy and financial markets, would be even stronger.

The IMF notes that the economic repercussions could be “considerable”, especially for the tourism and trade sector. “A rise in energy bills and borrowing costs, driven by an unexpected tightening of financing conditions in the region, could also dampen growth,” notes the same report.

If in low-income countries, the IMF forecasts still negative growth due, in particular, to the situation in Sudan, disinflation is expected to continue in most countries in the MENA region due to “national specificities”.

The growth rate in the West Bank and Gaza is, according to IMF calculations, around -6% in 2023, down 9 percentage points compared to forecasts last October. Overall, the IMF considers that the outlook is “very uncertain and the downside risks are increasing”.

The impact of the blockage of maritime traffic in the Red Sea and the war in Gaza will depend on the proximity and exposure of countries to the conflict zone, like Egypt, Lebanon and Jordan. Egypt, for example given the existing connection between the Suez Canal and maritime traffic between the Red Sea and the Mediterranean, could be significantly impacted.

In the first half of 2023, trade transiting through the Suez Canal represented 12% of global trade, including 30% of container traffic, 10% and 15% of maritime freight, and 8% of liquefied natural gas by the Sea route. “Since January 21, 2024, the cumulative freight volume over 10 days has fallen by 50%,” notes the same source.

“The application of crisis management measures and preventive policies will be decisive in countries which suffer serious repercussions or face high risks,” specifies the report.

As for other countries, adds the same source, “they will have to continue to consolidate their room for manoeuvre. Monetary policy must imperatively remain focused on price stability…”.

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