The International Monetary Fund revised its growth forecasts for the Middle East and North Africa downward again amid an “unusually high level of uncertainty,” according to its latest regional economic report.
The Middle East's energy producers are expected to earn $270 billion less in oil revenue compared to last year as the region's economic heavyweight, Saudi Arabia, sinks into recession amid the coronavirus pandemic, according to the International Monetary Fund's outlook.
It now expects MENA economies to contract 5.7% in 2020. In April, it predicted that the region would shrink 3.3% for the year.
"We are in a year like no other and therefore developments are very fast and coping with them is challenging for everyone," Jihad Azour, director of the IMF's Middle East and Central Asia department, told The Associated Press.
The IMF had projected in April that Saudi Arabia's economy would contract by about 2.3% this year. It has since revised that figure downward, saying the kingdom stands to see economic growth shrink by 6.8% before climbing to around 3% growth next year.
To raise state revenue, Saudi Arabia tripled taxes on basic goods and services this month, increasing value-added tax to 15%.
While the IMF has for years been urging Gulf states to introduce tougher austerity measures, "we did not recommend the specific measure here" for Saudi Arabia, Azour said.
He said the IMF's overall recommendation now is that governments that can afford to do so should consider the risks of a second wave of coronavirus and introduce measures that shore up the economy and protect the livelihoods of people.
Meanwhile, oil-importing Mideast countries, which include Egypt, Jordan and Sudan, are expected to see an overall economic contraction of 1.1%, nearly unchanged from the IMF's April projections. The overall level of inflation in these countries, however, is expected to reach 10%.
The large and growing deficits are expected to push public debt levels to 95 percent of GDP among Middle East oil importers by the end of this year.
The woes of oil-importing nations are also compounded by a sharp drop in remittances from their nationals working overseas, who have been put out of work due to the pandemic, Azour said.
The report also warned that the potential decline in expatriate workers - who account for more than 70 percent of the labour force in some oil-exporting countries - would also dampen their recovery.
"This (coronavirus) crisis highlighted the vulnerabilities that exist in the system," Azour said, especially in countries where there are high levels of informal workers and youth unemployment.
"We are calling for revamping social protection, improving access to social services, and also increasing the level of financial inclusion to help and support those who are vulnerable," he said.
The IMF said that the region's hardest-hit countries will be those that are "fragile and in conflict situations," with their economies forecast to contract by as much as 13 percent.
GDP per capita in those unstable countries is expected to plummet from $2,900 in 2018-2019 to just $2,000 this year.
"This is a dramatic downturn that will aggravate existing economic and humanitarian challenges and raise already high poverty levels," the report said.
"Social unrest could be rekindled as lockdown measures are lifted."
Since the start of the year, the IMF has approved about $17 billion in emergency loans to countries in the Middle East and the wider region, including $5.2 billion for Egypt and nearly $1.4 billion for Pakistan.
