Challenges facing the world present opportunities for the Middle East and North Africa to become more of a connection point, the International Monetary Fund's regional director said.
While crises including the war in Gaza and disruptions to Red Sea shipping continue to have implications for the region, “there are hopes”, Jihad Azour told The National on Tuesday.
“There are changes and challenges in the world. The world is more fragmented. But this is opening opportunities too for the region to be more of a connection point, to be more a bridge and a platform,” he said at the World Governments Summit in Dubai.
“There are hopes. The IMF is working on that … to see how we can increase co-operation [between the countries] and what that brings and with whom to co-operate and how.”
The IMF in January cut its growth forecast for the Mena region as the conflict in Gaza compounds challenges for highly exposed economies.
Assuming the war eases after the first quarter of 2024, growth in the Mena region is projected to expand 2.9 per cent this year, the Washington-based fund said at the time.
That marks a downward revision of 0.5 percentage points from the fund’s October 2023 estimates of 3.4 per cent growth for Mena economies, the IMF said in its Regional Economic Outlook report for the Middle East.
With the Gaza war leading to violence in Syria, Iraq and Lebanon – and Egypt’s economy also affected – concerns have grown that the conflict will have an increasing impact on the wider region.
“Disaster has led to negative economic impact. How to measure that impact? It can be measured in two ways: the impact on the epicentre, the economy of Palestine, both Gaza and West Bank, and the impact of all that on the other countries,” Mr Azour said.
Palestine's economy shrunk in 2023 and it is expected to do so again this year also, he warned, “unless there’s a major change that takes place … in stopping the war and starting the recovery very fast”.
Other countries affected by the war include Lebanon, Syria, Jordan, Iraq and Egypt, Mr Azour added.
“The impact for in 2024 is the downgrade of growth between 0.6 per cent and 0.4 per cent in Egypt. In the case of Jordan, it could be higher,” he said.
Meanwhile, Lebanon’s economic crisis appears to be worsening and there are few solutions on the horizon. Mr Azour said the country needed to bring confidence back if it was to turn the situation around.
“The lack of confidence is what is limiting the capacity of Lebanon to recover. You need to convince your investors and show them how you are going to address the financial sector issues and how you are going to put the public finance in sustainable hands,” he said.
“You also need to convince your partners, because Lebanon cannot grow and address its problems without its partners – multilateral institutions, bilaterals and also your space, which is the Arab world.”
He highlighted four channels of transmission for the conflict in Gaza.
“Trade is the most affected one, especially as the trade is going down – we have a drop of almost 50 per cent of the traffic through the Suez Canal. It has an impact on Egypt, in terms of foreign currencies … and it also has an impact on the whole region in terms of the stability of trade,” Mr Azour said.
Another channel is tourism. “We saw a negative impact on tourism in the last quarter of 2023. The good news is 2023 was good before that. The question is how this sector will recover in 2024,” he said.
The other channels are oil and gas, and investments. In the oil and gas sector, the IMF saw small volatility in the beginning, “but the market recovered and the global forces are shaping the oil market this year through demand and supply”, Mr Azour said.
As for financial channel, the IMF saw some outflows in the beginning “but that came back”.
“But we need to look at what’s happening also from the medium-term perspective. It’s not only a story of 2024, it's a longer story whereby we are in transformation at the moment,” Mr Azour said.
“There are big challenges and they need to be addressed. And also, the world is changing. We need to understand how the world is changing and what opportunities could come from all these transformations that are happening at once, and not just in the negative sense. Anything that is changing can be negative or positive.”
