IIF says coronavirus yet to directly impact Middle East and North African economies

Any future impact of the virus will be less severe than that of other emerging economies

The outbreak of the deadly corona virus so far has not directly affected the Middle East and North African economies and any future impact will be milder than other emerging economies, according to the Institute of International Finance.

There is nothing so far in terms of data that warrants a downward revision of growth forecast of Mena economies, Garbis Aradian, chief economist at the IIF said in Riyadh where G20 Finance and central bank governors are meeting.

“It [the impact on Mena] is contained,” he said. “The Mena region is not very highly integrated into the global economy …. Its impact will not be as severe as the other emerging economies.”

The indirect impact on the region may come through a drop in oil prices in the wake of the outbreak and reduced number of tourists, he noted.

Mr Iradian’s views are in line with those of Michael Bolliger, UBS's head of asset allocation for emerging markets, who on Thursday said the virus has had little direct impact on the GCC so far.

China accounts for about 15 per cent of global tourist numbers and economies such as Thailand, which rely on Chinese tourism for about 50 to 60 per cent of its foreign exchange, are more likely to get affected by a drop in the tourist numbers.

“If the Chinese are not going outside, depending on how long it will last, it will affect the South-east Asian economies [more than Mena],” Mr Aradian said. “Even in the case of Egypt …. even with the coronavirus, it could still grow by 4.5 to 5 per cent [this year].”

The latest outbreak of the deadly coronavirus, named Covid-19, has its epicentre in the Chinese city of Wuhan. China has so far reported more than 75,500 cases with more than 2,200 deaths. Outside China more than 1,150 cases of the virus have been confirmed in 26 countries and there have been at least eight deaths as a result of the infection.

China’s economy has come to a grinding halt as a result of the outbreak. Factories remain idle in most parts of the country as government restricts movements of people to curb the spread of the virus. The world's second largest economy slowed last year on the back of a trade war with the US and it is expected to drop further this year due to the epidemic.

The Mena economies, especially those in the six-member economic bloc of the GCC, are expected to expand faster than last year. The IIF expects real GDP of Mena to expand by 1.9 per cent this year, outpacing 0.7 per cent economic expansion recorded in 2019. For GCC, it estimates GDP growth of 2 per cent from 0.8 per cent last year.

The region, however, may feel the indirect impact of the virus outbreak, as a slowdown in China crimps global growth and oil prices drop due to softer demand, he noted. The IIF, which before the outbreak estimated Brent crude to average $60 a barrel this year, now projects an average of about $57.