Saudi Northern Region Cement’s profit drops by 27% on lower sales

RIYADH: The war in Ukraine and sanctions on Russia have hit the economic recovery of the Middle East and North Africa, the International Monetary Fund said on Wednesday.

The IMF report said the crisis has dealt a huge blow to low-income countries while benefiting oil-producing states.

The IMF’s growth forecast for the region, which includes Arab countries and Iran, was forecast at 5 percent, up from the 4.1 percent prediction for this year made in October.

But the predicted growth masks the disparities between the region’s 22 countries, which range from major oil exporters to nations wracked by war and others that depend heavily on wheat imports as well as hydrocarbon imports.

Russia’s invasion of Ukraine and economic sanctions on Moscow have affected the region “through a multitude of direct and indirect channels,” according to the IMF report.

“We expect growth to slow from 5.8 percent in 2021 to 5 percent in 2022. Growth is largely fueled by oil and gas exporters like Saudi Arabia. But the prospects for emerging markets and low-income countries are worsening,” the IMF tweeted. 

It said inflation in the MENA region also surged to 14.8 percent in 2021, mainly driven by rising food prices. “We expect it to remain high at 13.9 percent in 2022,” IMF said. 

The Fund expects continued economic growth in the Gulf countries in the future, supported by high oil prices and exports, Jihad Azour, IMF director for the Middle East and Central Asia, told Asharq. 

There are three main sectors in the Egyptian economy that need quick reforms, Azour said.  

The reforms he referred to are monetary policy reform, increased exchange rate flexibility, and intensification of basic structural reforms. 

Structural reforms have become even more urgent, to prevent scarring from the pandemic and the war and ensure an inclusive recovery, according to the report. 

Azour indicated that Lebanon and Tunisia need urgent measures and financial support from the countries of the world to get out of the current crisis. 

Emerging markets and middle-income countries, including Egypt, Jordan and Morocco, are forecast to register GDP growth of 4.4 percent, on average.

The IMF warned that emerging markets and middle-income countries face worsening prospects, given their governments’ limited capacity to cope with inflation as geopolitical uncertainties persist.