World Bank Sees 5.2% Contraction in MENA, In Line With IMF

Abeer Abu Omar

19 Oct 2020, 07:38 PM IST

(Bloomberg) -- The World Bank anticipates that economies in the Middle East and North Africa will contract more deeply than initially estimated, fueled by the double burden of lower crude prices and the spread of Covid-19.

The global lender revised its estimate to a 5.2% shrinkage this year versus an April forecast of a 1.1% contraction, according to its updated regional economic outlook published Sunday.

The outlook is in line with that of the International Monetary Fund, which last week predicted gross domestic product would contract 5% in 2020.

Even before this year’s crises, “the loss of potential growth because of the lack of transparency, lack of governance and the very heavy role of the state” had dragged the region’s economies downward, Ferid Belhaj, the bank’s vice president for MENA, said in an interview.

World Bank Sees 5.2% Contraction in MENA, In Line With IMF

The dual shock of lower Brent prices and the coronavirus pandemic this year has taken an especially heavy toll on the region, home to the world’s largest crude exporters.

MENA’s 2020 current-account deficit is forecast at 4.8% of GDP, versus a 1% shortfall in October 2019. The fiscal deficit is seen at 10% of GDP, from 4.7%.

Around the world, nations have had to halt their economies to contain the spread of Covid-19, while injecting stimulus directly and indirectly. Virus cases are spiking again in many regions, and countries including the U.K., Italy and France are considering reimposing lockdowns, fueling concerns about a further economic downturn and more uncertainty.

The World Bank’s revision this year reflects “an increasingly pessimistic outlook for the regional economy,” according to the report. “The region is expected to recover only partially in 2021.”