DUBAI: The Middle East and North Africa economy will contract by 3.3 percent this year, the biggest slump in four decades, hammered by the coronavirus and low oil prices, the IMF said Tuesday. In its World Economic Outlook, the International Monetary Fund said the damage would be much worse than the region's last major shock, the 2008-09 global financial crisis, when it managed to post modest growth.

The region, which includes all Arab countries and Iran, will suffer its worst economic performance since 1978 when it was convulsed with unrest and shrank by 4.7 percent, according to World Bank data. The IMF said that all the Arab countries apart from Egypt will see their gross domestic product (GDP) fall this year.

Saudi Arabia, the region's heavyweight which is just emerging from an oil price war with Russia that saw crude prices crash, is headed for a 2.3 percent contraction. "The fast deterioration of the global economic outlook as the epidemic has spread and the breakdown of the OPEC+ agreement among oil suppliers have weighed heavily on commodity prices," the global lender said.

Its report was prepared before the OPEC+ grouping-which takes in OPEC producers and allies-reached agreement on Sunday to cut output by nearly 10 million barrels per day, the largest in history. From mid-January to end-March, oil prices dropped by 65 percent or $40 a barrel and natural gas prices declined by 38 percent, the IMF said. It also projected prices to remain below $45 a barrel through 2023, around 25 percent below the average last year.

'Extreme uncertainty'
Arab countries, which have reported more than 20,000 coronavirus cases along with over 700 deaths, have resorted to sweeping lockdowns and curfews to prevent the spread of the disease, disrupting local economies. Years of bloody conflicts in several Arab countries including Syria, Yemen, Iraq and Libya have already battered their economies and created widespread poverty.

And many Middle Eastern countries, notably the Gulf states plus Iraq and Iran, depend heavily on oil revenues to finance their budgets. "These developments are expected to weigh heavily on oil exporters with undiversified revenues and exports," said the IMF, adding that lower oil prices will meanwhile benefit oil-importing nations.

The IMF said that the latest oil output cut will further dampen the prospects of the Saudi economy, which grew by just 0.3 percent in 2019. The United Arab Emirates' economy, the most diversified in the region, is projected to contract by 3.5 percent, while Qatar, the third-largest in the Gulf, is expected to slide 4.3 percent. Iran's economy, the second largest in the Middle East, is forecast to shrink 6.0 percent in 2020 for its third contraction in a row. In 2018 and 2019, it shrank by 3.6 percent and 7.6 percent respectively.

Iran has been hit hard by the coronavirus, reporting more than 73,000 cases and 4,585 deaths. The economy of Lebanon, which has defaulted on its mountain of debt, is expected to contract by a massive 12 percent, while Iraq, OPEC's second-largest producer, is headed for a fall of 4.7 percent. Only Egypt is projected to stay in positive territory with 2.0 percent growth although that is way down from the 6.0 percent projected before the coronavirus crisis hit.

As a whole, the Middle East and North Africa economy, which grew by just 1.0 percent last year, is projected to rebound by 4.2 percent in 2021, the report said. But the IMF noted that "extreme uncertainty" surrounds its forecast because the economic fallout of the pandemic depends on factors that are hard to predict-including the pathways of the disease and the intensity of containment efforts.

Deep recession
The coronavirus pandemic is pushing the global economy into its deepest recession in a century, cutting world output by three percent this year, and the crisis could get worse, the International Monetary Fund said Tuesday. The downturn will slash $9 trillion from the world economy, IMF chief economist Gita Gopinath told reporters as she presented the latest forecasts in the World Economic Outlook.

If the virus is contained and economies can begin operating again, 2021 should see a rebound of 5.8 percent, according to the IMF. But the authors acknowledged the difficulty in making an accurate forecast amid the rapidly changing situation. With much of the global economy shut down amid efforts to contain the virus and keep health systems from collapsing, the IMF warned that there are "severe risks of a worse outcome" due to the "extreme uncertainty around the strength of the recovery."

"The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion, greater than the economies of Japan and Germany combined," Gopinath said. The coronavirus has infected nearly two million people worldwide and killed close to 120,000, bringing travel to a standstill and forcing businesses, shops and restaurants to close. "Much worse growth outcomes are possible and maybe even likely," the report cautioned, "if the pandemic and containment measures last longer… or if widespread scarring effects emerge due to firm closures and extended unemployment."

'The Great Lockdown'
The report, released ahead of the virtual spring meetings of the IMF and World Bank, said "The Great Lockdown"-as the IMF dubbed the global downturn-is the worst since the Great Depression of the 1930s. It also is the first contraction since 2009 during the global financial crisis, but that episode hardly bears comparison. Though the effects lingered, the decline amounted to just 0.1 percent, and large emerging market economies were still growing at a solid pace.

This year, the only economies expected to be spared from recession are China-where the virus originated-and India, but even those countries will see only relatively paltry growth of 1.2 percent and 1.9 percent, respectively. In the depression nearly a century ago, the global economy contracted by about 10 percent while advanced economies shrunk by 16 percent from 1929 to 1932. The IMF now expects advanced economies to shrink by six percent in 2020.

The US economy is expected to contract by 5.9 percent but see growth recover by 4.7 percent next year. However, the forecasts assume the pandemic will fade in the second half of the year. The IMF projects drops of 7.2 percent in France and 6.5 percent in Britain, but the governments in those countries are even more pessimistic, projecting contractions of eight percent and 13 percent, respectively.

Must work together
The severe slowdown is "unavoidable," but "substantial targeted fiscal, monetary and financial" measures can soften the blow, the IMF said. Many governments have already deployed massive spending measures in tandem with central banks that have been pumping liquidity into the financial system to prevent any breakdown. But Gopinath said even more will be needed once the health crisis is over. "Once the recovery happens, and we are past the pandemic phase for advanced economies, it would be essential to undertake a broad based fiscal stimulus," she said. - AFP