Abstract

A year into the coronavirus (COVID-19) pandemic, the race between vaccine and virus entered a new phase in the Middle East and Central Asia, and the path to recovery in 2021 is expected to be long and divergent. The outlook will vary significantly across countries, depending on the pandemic’s path, vaccine rollouts, underlying fragilities, exposure to tourism and contact-intensive sectors, and policy space and actions. 2021 will be the year of policies that continue saving lives and livelihoods and promote recovery, while balancing the need for debt sustainability and financial resilience. At the same time, policymakers must not lose sight of the transformational challenges to build forward better and accelerate the creation of more inclusive, resilient, sustainable, and green economies. Regional and international cooperation will be key complements to strong domestic policies.

Title Page

World Economic and Financial Surveys

Regional Economic Outlook Update

Middle East and Central Asia

APR 21

INTERNATIONAL MONETARY FUND

Copyright Page

©2021 International Monetary Fund

Cataloging-in-Publication Data

Names: International Monetary Fund, publisher. | International Monetary Fund. Middle East and Central Asia Department, issuing body.

Title: Regional economic outlook update. Middle East and Central Asia.

Other titles: Middle East and Central Asia. | MCD REO. | World economic and financial surveys. Description: Washington, DC : International Monetary Fund, 2021. | World economic and financial surveys, 0258-7440. | Apr. 21. | Includes bibliographical references.

Identifiers: ISBN 9781513576152 (English Paper)

9781513576176 (Arabic Paper)

9781513576183 (French Paper)

9781513576169 (Russian Paper)

Subjects: LCSH: Economic forecasting—Middle East. | Economic forecasting—Asia, Central. | Economic development—Middle East. | Economic development—Asia, Central. | Middle East— Economic conditions. | Asia, Central—Economic conditions.

Classification: LCC HC415.15.A1 R44 2021

The Regional Economic Outlook: Middle East and Central Asia is published twice a year, in the spring and fall, to review developments in the region. Both projections and policy considerations are those of the IMF staff and do not necessarily represent the views of the IMF, its Executive Board, or IMF Management.

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Contents

  • Acknowledgments

  • Country Groupings

  • 1. Regional Developments and Outlook

    • A Year Into the Pandemic: Where Does the Middle East and Central Asia Region Stand?

    • The Activity Bounced Back, but the Recovery Is Uneven among Sectors and between Countries

    • Where Is the Region Heading? Divergent Recovery Paths

    • Exceptional Uncertainty Around the Outlook

    • Balancing Act: How Should Countries Manage the Crisis Impact and Accelerate Recovery

    • ... While Building Forward Better

  • 2. Government Debt and Financing Legacy Risks from the Pandemic

    • Context: Pre-COVID-19 Landscape

    • A Year After the Start of the Pandemic: Vulnerabilities Are Rising

    • Financing Risks Ahead

    • Policy Implications

  • Figures

  • 1.1 COVID-19 Infection Rates

  • 1.2 Global Oil Supply & Demand

  • 1.3 Fiscal Support in Response to COVID-19

  • 1.4 Monetary Policy Rate Adjustment

  • 1.5 Remittances

  • 1.6 MENA and Pakistan Firms’ Revenue Performance

  • 1.7 Public Debt

  • 1.8 The Speed of the Recovery Will Vary across the Region

  • 1.9 Vaccination Costs vs GDP per Capita

  • 1.10 Mobility and Social Unrest in ME&CA

  • 1.11 Coverage of Cash Transfer Programs

  • 1.12 Internet Access and Mobile Penetration

  • 2.1 Public Gross Financing Needs, 2020

  • 2.2 Average Maturity at Issuance of Local Currency Bonds

  • 2.3 Debt, Financing, and the Sovereign-Bank Nexus in ME&CA’s Emerging Markets

  • 2.4 International Market Access in ME&CA

  • 2.5 Limited Financing Constrained ME&CA-LICs Response to the Crisis

  • 2.6 Bank Credit Exposure to the Public versus Private Sector

  • 2.7 Public Financing and Crowding-Out Risks Ahead in ME&CA-EMs

  • Tables

  • 2.1 2021–22 Public Gross Financing Needs and Sources

  • MENA, Afghanistan, and Pakistan: Selected Economic Indicators, 2000–22

  • CCA Region: Selected Economic Indicators, 2000–22

Acknowledgments

The Middle East and Central Asia Regional Economic Outlook (REO) Update is prepared each spring by the IMF’s Middle East and Central Asia Department (MCD). The analysis and projections contained in the MCD REO are integral elements of the department’s surveillance of economic developments and policies in member countries. It draws primarily on information gathered by MCD staff through their consultations with member countries.

The analysis in this report was coordinated under the general supervision of Jihad Azour (Director of MCD). The project was directed by Taline Koranchelian (Deputy Director in MCD), S. Pelin Berkmen (Chief of MCD’s Regional Analytics and Strategy Division), Yasser Abdih (Deputy Chief of MCD’s Regional Analytics and Strategy Division), and Cesar Serra (Deputy Chief of MCD’s Regional Analytics and Strategy Division).

The primary contributors to Chapter 1 were Olivier Bizimana and Joyce Wong. Additional contributors were Maximiliano Appendino, Dalmacio F. Benicio, and Mohamed Belkhir. The primary contributors to Chapter 2 were Jeta Menkulasi, Lawrence Norton, Sidra Rehman, Cesar Serra, and Suchanan Tambunlertchai.

Gohar Abajyan, Oluremi Akin-Olugbade, Kate Nguyen, Jawed Sakhi, and Tucker Stone managed the database and provided research assistance.

Production support was provided by Haya Abu Sharar and Gintare Gedrimaite. Cheryl Toksoz of the Communications Department coordinated the editing and production of the REO. Nordine Abidi, Maria Atamanchuk, Aidyn Bibolov, Tannous Kass-Hanna, Moheb Thabet Malak, Issouf Samake, and Vahram Stepanyan reviewed the translations. They collaborated on the content with Mahmoud Asaad, Sherif Helmy, Heba Khalil, and Baya Kourdali (Arabic); Jean-Yves Lestienne and Monica Nepote-Cit (French); and Alexandra Akchurin and Denis Pshenichnikov (Russian), in coordination with Yelena Eydinova and Xiaochen Wang (Translation Coordination Center) from Language Services. Cooper Allen provided editorial support.

Country Groupings

The April 2021 Regional Economic Outlook (REO) Update: Middle East and Central Asia, covers countries in the Middle East and Central Asia Department (MCD) of the International Monetary Fund (IMF). It provides a broad overview of recent economic developments and of prospects and policy issues for the medium term. To facilitate the analysis, the 32 MCD countries and territories covered in this report are divided into three (nonoverlapping) groups, based on export earnings and level of development: (1) Oil Exporters (MCD OE), (2) Emerging Market and Middle-Income Countries (MCD EM&MI); and (3) Low-Income Developing Countries (MCD LIC). Additional analytical and regional groups provide more granular breakdown for analysis and continuity. The country and analytical group acronyms and abbreviations used in some tables and figures are included in parentheses.

MCD OE include Algeria (ALG), Azerbaijan (AZE), Bahrain (BHR), Iran (IRN), Iraq (IRQ), Kazakhstan (KAZ), Kuwait (KWT), Libya (LBY), Oman (PMN), Qatar (QAT), Saudi Arabia (SAU), Turkmenistan (TKM); and United Arab Emirates (UAE).

MCD EM&MI1 include Armenia (ARM), Egypt (EGY), Georgia (GEO), Jordan (JOR), Lebanon (LBN), Morocco (MAR), Pakistan (PAK), Syria (SYR), Tunisia (TUN); and West Bank and Gaza (WBG).

MCD LIC include Afghanistan (AFG), Djibouti (DJI), Kyrgyz Republic (KGZ), Mauritania (MRT), Somalia (SOM), Sudan (SDN), Tajikistan (TJK), Uzbekistan (UZB); and Yemen (YMN).

Caucasus and Central Asia (CCA) countries include Armenia, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.

CCA oil exporters (CCA OE) include Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan.

CCA oil importers (CCA OI) include Armenia, Georgia, the Kyrgyz Republic, and Tajikistan.

Middle East and North Africa (MENA) includes Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the United Arab Emirates, West Bank and Gaza, and Yemen.

MENA oil exporters (MENA OE) include Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen.

MENAP oil importers include Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Somalia, Sudan, Syria, Tunisia, and West Bank and Gaza.

MENA oil importers include Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Somalia, Sudan, Syria, Tunisia, and West Bank and Gaza.

Arab World includes Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, West Bank and Gaza; and Yemen.

The Gulf Cooperation Council (GCC) comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

The Non-GCC oil-exporting countries are Algeria, Iran, Iraq, Libya, and Yemen.

Fragile states and conflict-affected countries (FCS) include Afghanistan, Djibouti, Iraq, Lebanon, Libya, Somalia, Sudan, Syria, Tajikistan, and Yemen.

North Africa countries include Algeria, Djibouti, Egypt, Libya, Mauritania, Morocco, Sudan, and Tunisia.

Conflict countries include Libya, Syria, and Yemen.

What is new: New aggregates, MCD OE, MCD EM&MI, and MCD LIC, were introduced starting April 2021 REO update.