IMF warns of deeper MENA recession and rising social unrest risks

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The economic outlook for the Middle East and North Africa (MENA) was already grim as the region struggles to cope with the fallout of the coronavirus pandemic.

Iraqi demonstrators pose for a photo after burning objects to block the road during a protest in June. On Monday, the IMF warned that rising social unrest is a key risk as MENA economies struggle with the fallout of the coronavirus pandemic [File: Alaa Al-Marjani/Reuters]

On Monday, that horizon darkened further as the International Monetary Fund (IMF) projected an even deeper recession for the region, and warned of the spectre of rekindling social unrest as inequality and poverty deepens.

The IMF now sees economic growth in the Middle East and Central Asia shrinking 4.7 percent this year - a full 2 percentage points lower than its April forecast.

"The unusually high level of uncertainty regarding the length of the pandemic and its impact on firm closures, the resulting downside risks (including social unrest and political instability), and potential renewed volatility in global oil markets dominate the outlook," the IMF said in its latest update.

The IMF said 2020 oil income for the region would be $270bn less than last year. MENA economies that are heavily dependent on energy exports have been hammered by this year's oil price rout as coronavirus guts crude demand, and the market grapples with the lingering effects of the oil price war Saudi Arabia initiated in March.

The IMF did caution that there is tremendous uncertainty surrounding the outlook, depending on "the evolution and persistence" of the pandemic.

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The downturn could be less severe, for example, if a vaccine arrives sooner than expected or if authorities can find a way to keep economies open and health systems functioning without reengaging lockdowns should fresh waves of infections take hold.

By Al- Helalee

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