Economies in the Middle East and Central Asia will shrink by 4.7 per cent this year due to Covid-19 and lower oil prices, the International Monetary Fund said.
The contraction is two percentage points more than what it forecast in April, the fund said in its latest economic outlook for the region.
It is also in line with the revised outlook for the world economy, which will shrink by 4.9 per cent this year, according to the IMF.
The fund said the pandemic will continue to test the resilience of Middle Eastern and Central Asian economies, given the “unusually high uncertainty” of its impact on businesses and the risk posed by potential oil market volatility.
Although the region’s response to the pandemic was swift and saved lives, the fund said the impact on domestic economic activity was significant.
“A sharp decline in oil prices, together with production cuts among oil exporters and disruptions in trade and tourism added further headwinds,” it said.
Oil prices, which fell by more than 70 per cent this year, recovered after the Opec+ group of oil exporters, led by its biggest producers Saudi Arabia and Russia, agreed to output cuts to curtail supply.
However, crude prices remain significantly lower than the peak they reached last year.
While several countries in the region have begun to reopen their economies, the fund said rising infection numbers could pose risks.
The virus has infected more than 12.8 million people worldwide and killed more than 568,000, according Johns Hopkins University, which is tracking the outbreak.
The fund projects a cumulative loss of more than $12 trillion (Dh44tn) to the global economy, which is expected to slide into its deepest recession since the 1930s.
Governments worldwide, including Saudi Arabia and the UAE – the two biggest Arab economies, have pumped in an additional $11tn (Dh40.4tn) into their economies to limit the economic damage caused by the pandemic. The size of fiscal support stood at $8tn (Dh29.38tn) in April.
Despite this, the IMF said downside risks remain. It expects a sluggish global recovery of 5.4 per cent next year.
Within the broader Middle East and Central Asia region, the pull back is largely driven by economies in the Middle East, North Africa, Afghanistan and Pakistan, where growth this year is expected to be two percentage points weaker than what the IMF forecast in April.
The fund expects the Menap region's real gross domestic product to shrink by 5.1 per cent this year, before expanding next year by 3.1 per cent.
In contrast, growth in the Caucasus and Central Asia region was revised down by half a percentage point on the back of strong policy responses in some countries and lower oil production cuts than those observed in the Menap region, the fund said.
“Despite supportive policies, growth revisions appear to be linked to lockdowns and mobility,” the IMF said.
“Countries with the highest lockdown stringency or lower workplace mobility also showed bigger real GDP revisions since the April 2020 [estimates].”
The fund said the economies of oil-exporting nations in the Menap region are expected to contract by 7.3 per cent this year and expand by 3.9 per cent in 2021.
The downward revisions reflect the “double whammy” caused by oil price fluctuations and pandemic-linked restrictions.
The non-oil sectors of these economies also had their growth forecasts lowered due to Covid-19 restrictions that disrupted the tourism, hospitality, transportation and retail sectors, the fund said.
The economies of oil-importing nations in the Menap region are projected to contract by 1.1 per cent as forecast in April. However, there are substantial differences across countries.
This year's growth forecast has been lowered for several economies including Afghanistan, Djibouti, Jordan, Morocco and Sudan as sluggish growth in their trading partners is expected to have a “stronger-than-previously-projected impact on manufacturing and tourism exports”, the fund said.
Economic conditions in Lebanon, which is facing its worst financial crisis in three decades, continue to deteriorate, with a double-digit contraction expected this year, the IMF said.
Lebanon's annual inflation rate stood at 56 per cent in May while its currency has lost about two thirds of its value against the US dollar despite the imposition of informal capital controls.
The bio
Favourite book: Peter Rabbit. I used to read it to my three children and still read it myself. If I am feeling down it brings back good memories.
Best thing about your job: Getting to help people. My mum always told me never to pass up an opportunity to do a good deed.
Best part of life in the UAE: The weather. The constant sunshine is amazing and there is always something to do, you have so many options when it comes to how to spend your day.
Favourite holiday destination: Malaysia. I went there for my honeymoon and ended up volunteering to teach local children for a few hours each day. It is such a special place and I plan to retire there one day.
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Mohammed bin Zayed Majlis
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
Brief scores:
Everton 0
Leicester City 1
Vardy 58'
'The worst thing you can eat'
Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.
Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.
Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.
Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.
More on Quran memorisation:
RESULTS
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Winner: Arjan, Fabrice Veron (jockey), Eric Lemartinel (trainer).
5.30pm: Maiden (PA) Dh80,000 1,400m
Winner: Jap Nazaa, Royston Ffrench, Irfan Ellahi.
6pm: Al Ruwais Group 3 (PA) Dh300,000 1,200m
Winner: RB Lam Tara, Fabrice Veron, Eric Lemartinal.
6.30pm: Shadwell Gold Cup Prestige Dh125,000 1,600m
Winner: AF Sanad, Bernardo Pinheiro, Khalifa Al Neyadi.
7pm: Shadwell Farm Stallions Handicap (PA) Dh70,000 1,600m
Winner: Jawal Al Reef, Patrick Cosgrave, Abdallah Al Hammadi.
7.30pm: Maiden (TB) Dh80,000 1,600m
Winner: Dubai Canal, Harry Bentley, Satish Seemar.
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Squads
Australia: Finch (c), Agar, Behrendorff, Carey, Coulter-Nile, Lynn, McDermott, Maxwell, Short, Stanlake, Stoinis, Tye, Zampa
India: Kohli (c), Khaleel, Bumrah, Chahal, Dhawan, Shreyas, Karthik, Kuldeep, Bhuvneshwar, Pandey, Krunal, Pant, Rahul, Sundar, Umesh
UAE currency: the story behind the money in your pockets
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
UAE currency: the story behind the money in your pockets
The Freedom Artist
By Ben Okri (Head of Zeus)
