IMF: Vaccination inequality threatens early Middle East economic recovery

The Middle East and North Africa (MENA) economies that have most vaccinated their populations against COVID-19 will return to their pre-pandemic level next year, the International Monetary Fund (IMF) said on Sunday, raising its regional growth forecast for 2021.

The MENA region, which includes all Arab countries and Iran, experienced a 3.4 per cent contraction in GDP in 2020, according to the latest estimates, due to falling oil prices and containment measures taken to prevent the spread of COVID-19. According to the IMF, growth in the region will accelerate to 4 per cent this year, an increase of 0.9 points compared to its last projection published in early February. In its regional economic outlook report released on Sunday, the IMF says it expects GDP levels in the countries that have been most vaccinated to reach 2019 figures next year, while for others, the recovery will slow. 

"This multi-speed recovery is at different levels, between those who are quick on the uptake (...), those who will be slow and those who will be late," said Jihad Azour, director of the Middle East and Central Asia department at the IMF. "The deployment of the vaccine and the policy response play an important role in the quality and depth of the economic recovery," he added. 

The IMF expects the UAE economy to grow by 3.2 per cent this year, and the Dubai World Expo, rescheduled for October 2021, is key to the country's recovery. Dubai expects the huge event to attract 25 million visitors and a series of deals, heralding a bright post-pandemic future. The UAE has launched one of the fastest inoculation campaigns in the world, with more than 90 doses administered for every 100 residents as of this week. However, the collapse of hospitality, tourism and retail poses challenges for glitzy Dubai, where a cascade of layoffs hit foreign workers and reduced the emirate's population by 8.4 per cent, according to ratings agency S&P Global.

The outlook is bleaker for fragile and developing economies, many of them with delayed vaccination campaigns, few resources for fiscal stimulus and revenues largely from sectors such as tourism that have been the slowest to recover from the pandemic. While rich countries plan to vaccinate most of their populations within a few months, swathes of the region - from Afghanistan and Gaza to Iraq and Iran - are not likely to inoculate significant portions of their populations until mid-2022, according to the IMF.

The IMF forecasts a slow recovery in 2021 for oil-importing and tourism-dependent Egypt and Pakistan, which suffered an exodus of foreign investors last year. The Fund revised down its growth estimate for Jordan, where youth unemployment has soared to 55 per cent. Sudan remains mired in debt and threatened by instability, but its economy could grow for the first time in years as it gains new access to international financial networks. 

Lebanon, hit by economic, social and political crises, is the only country in the region where activity is expected to contract further after a 25% recession in 2020. The country, which has struggled for months to form a new government, entered into talks with the IMF for financial support last year, but quickly hit a wall due to a lack of political consensus on necessary reforms. "In the absence of a government, it is very difficult for us to provide anything more than technical assistance and political support," Azour said.

Some countries in the region, particularly in the Gulf, have launched mass vaccination campaigns. But access to vaccines remains a challenge for many other countries due to shortages, delivery delays, internal conflicts and financial difficulties. After contracting by 4.8 per cent in 2020, the oil-rich Gulf states are expected to grow by 2.7 per cent this year.

But elsewhere in the region, from Yemen and Sudan to Libya and Lebanon, where inflation is soaring, instability prevails and wars have left lasting scars, the damaging effects of the pandemic will linger and cause economic damage, the IMF says, possibly for years.

"We are a year into the crisis and the recovery is back, but it is a divergent recovery," Jihad Azour told The Associated Press. "We're at a turning point. ... The vaccination policy is the economic policy."