The fight to stem the outbreak of the coronavirus is one of the biggest challenges that the Middle East and North Africa has faced in the last hundred years, the International Monetary Fund said.
The region is affected by "dual shocks" that are "reinforcing each other", Jihad Azour, the IMF's director for the Middle East and Central Asia, told The National.
“The first one is the outbreak of the coronavirus and its impact on trade, its impact on exchange of goods and services and [the second] is the drop in the oil price.”
In order to fight the outbreak, “countries have to resort to gradually shut down their economies”.
Shutting down impacts small businesses and jobs.
“Of course, this is a crisis that affects the livelihoods of people,” he said.
“We are encouraging countries to give priority to healthcare, and to give priority to social programmes that will allow them to give more resources to the low-income people and to the fragile groups in the society.”
The IMF has made about $100 billion (Dh367bn) in emergency funding available and it has already received at least 90 requests, including from Tunisia. However, it isn’t just about what cash the IMF can provide, he said.
“We're trying to identify by what means we as a fund could cover, but also there are other institutions. And this is why we're co-ordinating with the World Bank, the UN agencies, as well as also, some of the Regional Development Bank's that can do more on those humanitarian grounds than we could do.”
The IMF's outlook for the Middle East and Central Asia matches a grim forecast for the world economy.
This year, economies in the Middle East and Central Asia will shrink on average by 3.1 per cent, representing a loss of output of $425bn.
Overall, he said, this is the most challenging crisis that the region has ever gone through.
“It's bigger than the 2008 international financial crisis, bigger than the drop in oil prices in 2015.
“We have to recognise that this crisis took everybody by surprise. And we are still in the eye of the storm.”
The UAE and Saudi Arabia, for example, “reacted fast in providing both needed measures to curb and address the aftermath of Covid-19 on people. And also they have introduced both fiscal measures as well as also monetary and financial measures in order to provide a relief for their economy," he said.
The extension of the Opec+ agreement "provides good news for those countries because it will help stabilise oil prices, but I think what is going to be important for those large economies is to protect some of the key sectors from the risk of dislocation, provide the needed support for the engines of the economy to be protected."
Recovery for the UAE and Saudi will depend on “how fast and how strong globally the recovery will be, because this will bring with it increasing demand for oil, and also the re-establishment of the trade and the value chain rules”, Mr Azour said.
The difficulty, he says, “is we don't know how long the crisis is going to last”.
Still, in the fourth quarter, according to IMF estimates, “the global economy will start exiting from the current shock, and then ... we would have rapid improvement in economic conditions. Yet it's not realistic to think that next year, we will go back to the pre-Covid-19 shock” levels of growth.
Countries already facing fragility before the coronavirus – such as Iraq and Iran, as well as those in conflict, Syria, Libya and Lebanon – “have a big issue and difficulty today” to cope with the health crisis, Mr Azour said.
He has “a lot of sympathy” for what the people of Iran are going through which comes “over and above a very weak economic and financial situation”.
Tehran is seeking $5bn in assistance from the Fund but the US, a powerful IMF board member, says none of it will reach the Iranian people.
"We have received a request and given the limited engagement we have over the recent times with Iran, it's taking more time to assemble the information required in order to process that request,” said Mr Azour.
The Iranian economy will contract 6 per cent this year, he said.
“Therefore the priorities [for Tehran] are protect lives and do whatever it takes in order to redirect resources and make funding available to address this issue.”
Mr Azour is a former Lebanon finance minister and he said the Fund “stands ready to help” with its economy forecast to contract by 12 per cent. This comes on top of a political and financial crisis that pre-dated Covid-19.
The country needs “a strong reform package that provides a solution to the crisis that financially and monetarily” it is facing “in order to restore confidence and also a plan that addresses the structural problems that Lebanon has been facing”.
However, Lebanon has still not formally requested financial assistance from the Fund.
The IMF is also thinking ahead.
“We are going back to the drawing board to see what needs to be done when we exit [the crisis] and how the situation will look and what are the challenges that countries need to face,” Mr Azour said.
“Otherwise, we will miss the recovery and the region that is already facing a high level of unemployment and low level of inclusion will face even more difficult challenges going forward.”