The managing director of the International Monetary Fund has called for the securing of jobs for young people in the Mena region as a key driver of growth and as a means to getting to peace and security.
Kristalina Georgieva, speaking to The National in Riyadh on the sidelines of the special meeting of the World Economic Forum in Riyadh, acknowledged the challenges facing the regional and global economy.
However, she sounded an optimistic note on a number of matters, including the UAE and Saudi Arabia being ready for technological transformation, and the global improvement on inflation.
"Let me start with the positives, we have seen tremendous reform momentum in many countries in the Gulf, a remarkable turn towards more diversified economies, more inclusive economies, opening up space for women to contribute in Jordan, in Egypt, determined actions that have helped [ease] the risks and the impact of a war next door," she said.
According to the latest economic outlook released by the IMF, the Mena region is poised for subdued growth of 2.7 per cent this year, lower than the fund's previous forecast in October.
Growth is being weighed down by conflicts, lower oil production, trade disruptions and high debt, the multilateral lender said.
"This region has been on the receiving end of shock after shock after shock, like the rest of the world: Covid, the war in Ukraine, cost-of-living crisis, and then on top of it, regional tensions that have reached a magnitude not seen in a very long time," Ms Georgieva said.
Some conflicts in the region also do not receive the required focus.
"Sudan doesn't get its fair share of attention. Yemen doesn't get its fair share of attention. And it is a call for the leading countries in the region to bring more in focus the importance of peace for development, and to bring more in focus this region for the rest of the world," Ms Georgieva said.
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Economic success can only be achieved "on the foundation of sound, macroeconomic policies, inclusive institutions, and attention to the most vulnerable people in society”, she said.
She stressed the importance of jobs as a way to grow the economy but also “for peace and security”.
According to the OECD, 55 per cent of the Mena region's population is under the age of 30, with nearly a quarter of them aged between 15 and 29.
"The region is so rich of young people, and just bringing jobs for each and every one and unleashing the entrepreneurial capacity of the youth can transform this region," Ms Georgieva said.
Inclusive growth amid tech boost
The IMF chief also nodded to the GCC’s focus on technology, especially in the UAE and Saudi Arabia.
“I also see a much stronger focus here on what role technology can play and a preparedness for a world in which digital is the norm and artificial intelligence is a contributor to productivity and growth," she said.
The Arab world's two largest economies are pushing for innovation in areas such as AI and advanced technology to drive their economic diversification agendas and to become global hubs for the future economy.
The focus on these areas has the potential to be “a major driver of prosperity for the future”, Ms Georgieva said.
And for that prosperity to be inclusive, Ms Georgieva said, "the most important thing is to invest in education throughout the lifetime of people to make sure that kids, in early age, get access to learning. And that quality of education is prioritised over quantity of education".
Globally, human capital is turning into the most important factor for growth, she said.
This requires everybody having the "same access to opportunity, the first and most important one being, of course, opportunity to develop your skills to develop yourself and then to apply these skills”.
The second crucial factor for inclusive growth in the Middle East is access to finance, which digitalisation can enable.
“I see that some of this power of financial inclusion is translated into the diversification in the Gulf economies," she said.
She also focused on the importance of the private sector, urging governments to “remove the obstacles to the private sector ... when there are excessive regulations, when there are complicated requirements for entrepreneurs to do their part, then it is hard for them to excel”.
Egypt must 'stay the course'
One economy of concern in the region, but which has been taking a more positive turn in recent weeks, is that of Egypt, which Ms Georgieva considers shows that “reforms work”.
In the first quarter of this year, Egypt signed several financing agreements with regional and international partners totalling more than $50 billion, as it struggled to stabilise its economy.
It began with a $35 billion deal with a UAE consortium to develop a community called Ras El Hekma on Egypt’s Mediterranean coast.
That facilitated the finalising of an $8 billion package from the IMF that had been in progress since 2022. That was followed by two more deals, one with the EU, under which $8 billion would be given to Egypt and another with the World Bank worth $6 billion.
The IMF conducted its first and second reviews of Egypt in March before the announcement of the deal, and the first tranche of $820 million has been transferred to the government, the IMF mission chief Ivanna Hollar said last month.
The fund will complete its third review of Egypt by the end of June.
"It was a year that we spent working together with the Egyptian authorities, because these reforms are not simple, they're not easy to implement," Ms Georgieva said.
"And most importantly, they don't bring results for people on the day of their introduction. So we did the preparatory work. And once Egypt moved on a number of reforms that have been necessary for the country, we have seen immediately a change in investment attitudes towards Egypt … this is the market saying we believe in you."
But she also cautioned that the path ahead remains long.
She stressed that “what Egypt needs to do is stay the course ... any wavering from the key areas, and we know what they are – they are in the area of state-owned enterprises, making sure that the state is only where it must be and pulled out from areas where the private sector can take over, making sure that there is transparency in governance, so corruption is bitten by the very best weapon and that is transparency and liberalising the way the exchange rate moves so it can be a buffer against what is happening outside”.
There is also a very strong focus on bringing inflation down in the country, she said. Headline inflation declined from 35.7 per cent in February to 33.4 per cent in March.
"Egypt now is adopting inflation targeting. And that is very healthy, because for the Egyptian people high inflation is horrible, and especially for the poorer parts of society," the IMF chief said.
There has been strong action from the government, which will support economic growth.
"We see a lot being done in Egypt. And all we are praying for is that we'll stay the course, to be there," she said.
“Egypt is in a very difficult spot. It is in a region with a lot of pain ... neighbouring Sudan is a source of refugees. Egypt is hosting nine million people. That is not an easy task. But having that courage to build a strong foundation for its people, for its economies, I admire it and I wish Egypt all the success."
Turbulent times
Ms Georgieva has concerns about the geopolitical turmoil witnessed globally and the potential impact of internal political troubles with a record number of elections scheduled for this year, from India to the US.
In its latest forecast, the IMF predicts the world economy to continue growing at 3.2 per cent during 2024 and 2025, at the same pace as in 2023.
Meanwhile, the forecast for global growth five years from now, at 3.1 per cent, is at its lowest in decades.
"It is not easy. But what helps is when we bring our members together, and we can show who are those who shine. And those who shine are countries that have strong monetary policy, inflation is down, have strong fiscal policy, they have buffers for future shocks, and they use their money wisely, to support the most vulnerable people, but also to inject investment in human capital ... in the digital transition," Ms Georgieva said.
"And actually we calculated that the implementation of these reforms ... in terms of governments, private sector participation and movement of financial resources, it can lift up, in this decade, global growth by 1.2 per cent."
There is already more collaboration globally to work on such measures and boost inclusive growth.
"Let's remember, we now project growth at around 3 per cent, way below the historical, almost 4 per cent growth, we can change this, it is in our hands, policymakers learning from each other."
Ms Georgieva also said the world appears to be on the right track to rein in stubborn inflation with monetary policy tightening working.
The IMF now projects global inflation to decline steadily, from 6.8 per cent in 2023 to 5.9 per cent in 2024 and 4.5 per cent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies.
"Inflation globally is going down, and in some countries that started raising interest rates earlier, like Brazil or Mexico, they're already cutting interest rates," she said.
She also expects the European Central Bank to move earlier than the US Federal Reserve in terms of rate cuts.
In the US, she acknowledged “it has been a bit tricky, up and down. The trend, however, has been down”.
With the world's largest economy appearing to be slowing “a little bit", it is "good news because if the economy remains as strong as it was, the ability to look at inflation as a phenomenon that is likely to trim down maybe constrained”, she said.
"We think that United States throughout this year is very likely going to reach the inflation target and we are likely to see this year the Fed taking an action [in terms of a cut]," she added.
Green in focus
With continued turbulence in the global economy, Ms Georgieva urged countries not to lose sight of the green transition.
"Cop28 delivered two fabulous results: the first one was the recognition that the world at some point needs to go out to fossil fuels. And the second one is a recognition that our level of ambition at that moment of time was insufficient to protect the future of our children," she said.
Since then, there has been more progress on countries revising their nationally determined contributions to match what is necessary to succeed, she said.
"But we are, by far, not there yet."
When calculating the required nationally determined contribution, it adds up to a 11 per cent reduction in emissions in this decade, while what is needed is between 25 per cent and 50 per cent, she said.
"And of course, in this more complicated economic situation, many countries feel compelled to turn their attention to other priorities. And that is fundamentally wrong," Ms Georgieva said.
"Because the green transition is also a huge opportunity to create a new type of growth that is low carbon. And that leads to climate resilience to make agriculture, for example, a source of strength. Agriculture that is based on the newest technologies can be consuming much less water, a big concern for the region, providing higher output and creating job opportunities in a sector that is still a very important sector."
While green transition is very often limited to the energy sector, it affects all sectors and "is an opportunity not to be missed", she added.
Looking ahead, Ms Georgieva, who was recently confirmed for a second term as the head of the IMF, said her priority for this term remains keeping the membership together.
"I'm very proud of my first term, we actually have grown in numbers from 189 to 190 [with Kosovo joining]. This year, the fund will become a family of 191 and that's working together, sharing experience."
Another area of focus is to "see the same sound fundamentals that helped us be resilient to the shocks of the past, be built across the world".
"And I want to see the fund focusing more on how to translate macroeconomic and financial stability into growth, jobs and prosperity," she said.
"Concentration on country-specific reforms that would lift up productivity, provide more opportunities, especially for young people, make capital work harder: this is what is going to be the content of my second term," Ms Georgieva added.
