Decision makers can seize on "plenty of opportunities" in the Middle East and North Africa that could help to minimise the impact of the Covid-19 pandemic on the region's economies and steer them back to growth, a panel of experts said.
Most countries in the region have done well in protecting lives, but will now need to shift focus to protect livelihoods, economists and policymakers said during a virtual panel discussion on Thursday.
Getting the balance right between opening up economies and mitigating the risk of further outbreaks remains the top priority. However, steps such as labour market reforms and trade barrier removals within the Arab world can stimulate private sector job creation to help speed up the recovery, they said.
“There are plenty of opportunities that are waiting for decision-makers to seize them. I don’t think we are lacking ideas and what is needed today is the resolve to put various stakeholders around the same table,” Jihad Azour, director of the IMF's Middle East and Central Asia department, said.
“It is important to seize this moment and move in the right direction.”
The webinar, arranged by the IMF, Carnegie Centre and the Dubai International Financial Centre, was moderated by Mina Al-Oraibi, the Editor-in-Chief of The National.
Dame Minouche Shafik, a director at the London School of Economics, Marwan Muasher, vice president at the Carnegie Endowment for International Peace, and Monica Malik, chief economist at Abu Dhabi Commercial Bank, also took part in the virtual discussion.
Economies in the Middle East North Africa and Central Asia region are grappling with the double whammy of the Covid-19 pandemic and volatility in oil prices. The IMF estimates gross domestic product in the Middle East and Central Asia will shrink 4.7 per cent this year. This projection is 2 percentage points lower than the fund's earlier forecast in April.
This is in line with the revised outlook for the world economy, which the Washington-based lender projects will shrink 4.9 per cent in 2020 before a sluggish recovery in 2021. The IMF estimates a cumulative loss of more than $12 trillion (Dh44tn) to the global economy, which is facing the deepest recession since the Great Depression.
Central banks and governments around the world have pumped an additional $11tn (Dh40.4tn) into their economies to limit the economic damage caused by the pandemic.
Most economies in the region have begun reopening after restrictions on movement were put in place to stem the spread of the pandemic. However, the infection rate is still on the rise in many parts of the world, including some countries in the Mena region.
“I would say keep an eye on the pandemic because the risk is not over,” Mr Azour said. “With the reopening there are increased numbers of [Covid-19] cases, therefore, we should not relax. I think this [protecting lives] is still the priority number one.”
The virus has infected more than 13.5 million people worldwide and killed more than 584,000, according to Johns Hopkins University, which is tracking the outbreak.
The IMF expects the contraction in the economies of the Arab world to be deeper this year than those in the Caucasus and Central Asia region. Economies of oil-exporting nations are facing greater challenges.
Ms Malik of ADCB said the path to recovery will be long and uneven, as the current crisis has hit both oil and non-oil sectors of regional economies.
The availability of a vaccine or improved control of the pandemic will be key to the recovery. However, governments will also have to come up with plans to broaden and deepen their economies, she added.
“The sectors that have got economies across the GCC and the Mena region where they are now are not going to provide the same growth and drive going forward,” Ms Malik said.
“With fiscal pressures, bringing in foreign investment is going to be very, very important … creating a framework for that is going to be [critical].”
Improved integration of economies across the Arab world and the removal of trade barriers would also be mutually beneficial, setting foundations for a sustained growth, Mr Muasher said.
“This region [Mena] needs to be a more integrated economy, whether it is currency union, labour movement or trade among countries,” he said. “This region is not trading with itself … the figure is that 7 per cent of all trade [from the region] happens in between Arab countries and the rest of the trade happens outside.”
Mr Azour agreed, saying Arab nations should try to find common areas of interest. Agriculture and food security, he said, are issues of great importance given the current crisis, and Arab countries can find common ground to work together on these.
Unemployment and labour market reforms are among the impediments to economic growth in the region. However, the current crisis has provided an opportunity to address these, Dame Minouche said.
“Crises open up possibilities … at the moment, the region has, in some ways, the worst of all possible worlds in terms of the policy framework around the labour markets,” she said. “Perhaps this shock might will open up the debate on how do we bring more people into the formal labour market, make it more flexible ... but in parallel produce social protection.”
Mr Muasher said citizens of Arab nations should be valued as a labour market resource, and they should have a voice in problem-solving, which is essential to speed up inclusive growth in the region.
“I will say three ‘Is’ - inclusion, inclusion and inclusion,” as not all economic challenges have purely economic solutions, he said.
“There is no magic wand that you can wave and solve economic problems of the region … whether it is [by] the end of 2020 or end of 2025,” Mr Muasher said. “You can only do that if the citizens are convinced that they are part of the solution.”