Middle Eastern countries are taking measures to contain the coronavirus disease (COVID-19) spread, yet they are hurting key job-rich sectors, the Director of the Middle East and Central Asia Department at the International Monetary Fund (IMF), Jihad Azour, said on Tuesday.
Azour added that tourist cancellations in Egypt have reached 80%, as the hospitality and retail sectors have been hard-hit in the United Arab Emirates and other countries.
Given the large numbers of people employed in the service sector, there will be wide reverberations if unemployment rises and wages and remittances fall, Azour added.
“The impact of COVID-19 and the oil price plunge in the Middle East and the Caucasus and Central Asia has been substantial and could intensify,” he noted.
Accordingly, Azour believes that this challenge will be especially daunting for the region’s fragile and conflict-torn states such as Iraq, Sudan, and Yemen. These countries will face a difficulty to equip their weak health systems for the outbreak, especially in the wake of reduced imports due to disruptions in global trade, medical shortages, and substantial price increases, Azour mentioned.
The pandemic is causing significant economic turmoil in the region through simultaneous shocks: drop in domestic and external demand; a reduction in trade, disruption of production, fall in consumer confidence, and tightening of financial conditions, he explained.
MENA’s oil exporters face the additional shock of plummeting oil prices, Azour added, noting that travel restrictions have reduced the global demand for oil, and the absence of a new production agreement among OPEC+ members has led to an overabundance in oil supply.
Oil prices plunged by over 50% since the start of the coronavirus pandemic, he mentioned. “The intertwined shocks are expected to deal a severe blow to economic activity in the region, at least in the first half of this year, with potentially lasting consequences,” he added.
Thus, the paramount policy priority for the region is to protect the population from the coronavirus, he said, adding that efforts should focus on mitigation and containment measures to protect public health.
Governments should spare no expense to ensure that health systems and social safety nets are adequately prepared to meet the needs of their populations, even in countries where budgets are already squeezed, he mentioned.
Azour explained that governments in the Caucasus and Central Asia, for example, are increasing health spending and considering broader measures to support the vulnerable and shore up demand. While in Iran, where the coronavirus outbreak has been particularly severe, the government is ramping up health spending, providing additional funding to its Ministry of Health.
Later this week, IMF’s Executive Board will consider a request from the Kyrgyz Republic for emergency financing, likely the first such disbursement since the outbreak of the COVID-19 pandemic, he said, adding that a few other requests will be considered by the board in the coming days.