The International Monetary Fund considered that the stringent measures that countries in the Middle East & North Africa (MENA) region imposed to contain the COVID-19 pandemic have significantly weighed on their economic activity. As such, it projected real GDP in the MENA region to shrink by 5.7% in 2020, compared to the Fund's April 2020 forecast of a 3.2% contraction for this year. It expected real GDP in MENA oil exporters to decline by 7.3% in 2020 relative to a contraction of 4.2% in April, due to the collapse of global oil prices, deeper oil production cuts, as well as to pandemic-related lockdowns. In addition, it projected non-oil GDP in MENA oil exporters to shrink by 6.8% in 2020, due to larger-than-anticipated disruptions to trade activity, as well as to the steeper-than-previously expected impact on the tourism and retail sectors. Further, it considered that subdued trade and tourism activity, as well as lower remittance inflows, tighter global financial conditions and spillovers on domestic credit conditions, are mainly offsetting the benefits from lower oil prices for oil importers in the MENA, Afghanistan, and Pakistan (MENAP) region. As such, it projected real GDP in MENAP oil importers to contract by 1.1% in 2020, and noted that the outlook varies across countries. 

In parallel, the IMF expected the fiscal deficit of MENAP oil importers to widen by 1.4 percentage points of GDP to 8.7% of GDP in 2020 due to fiscal stimuli and the reallocation of public expenditures towards coronavirus-related healthcare spending. It also anticipated the fiscal deficit of the region's oil exporters to deteriorate by 8.5 percentage points of GDP to 11.4% of GDP this year. Further, it projected the current account deficit of MENAP oil importers to narrow from 5.5% of GDP in 2019 to 5.2% of GDP in 2020 despite the erosion of tourism receipts and lower remittance inflows. It forecast the current account balance of MENA oil exporters to shift from a surplus of 3.2% of GDP in 2019 to a deficit of 5.4% of GDP in 2020. 

The Fund indicated that downside risks to the MENA region's outlook include a wider and more protracted spread of the virus, a longer-than-anticipated period of low oil prices and production cuts, as well as tighter financial conditions.
Source: International Monetary Fund

The World Bank projected Jordan's real GDP to contract by 3.5% in 2020 and to post its worst economic recession since 1989, mainly due to the impact of the COVID-19 pandemic. It noted that the country is facing significant socioeconomic challenges due to the virus outbreak, which has added to the economy's already low growth trajectory and elevated unemployment levels. It anticipated real GDP to grow by an average of 2.1% annually over the medium term, in case of sustained prudent policy measures and support from the international community. But it noted that the economy will continue to operate below its growth potential, given its deeply-entrenched structural weaknesses. 

In parallel, it expected the pandemic to severely weigh on Jordan's public finances and external imbalances in 2020. It projected the fiscal deficit to widen from 4.7% of GDP in 2019 to 7.2% of GDP in 2020, due to a significant drop in revenues and an increase in virus-related expenditures. As such, it anticipated the public debt level to rise from 99% of GDP at end-2019 to 111% of GDP at end-2020, and to remain vulnerable to growth- or fiscal-related shocks. Also, it projected the current account deficit to widen from 2.8% of GDP in 2019 to 5% of GDP in 2020, due to a sharp decline in export and tourism receipts that will offset the impact of lower oil prices. It expected the deficit to gradually narrow to about 4.5% of GDP annually over the medium term. It forecast remittance inflows to decline by 15% in 2020, as they are largely sourced from oil exporting economies. 

In addition, the World Bank indicated that risks to Jordan's macroeconomic outlook are significant and include a prolonged duration and magnitude of the COVID-19 pandemic, as well as heightened regional uncertainties. It added that the government could face challenges to meet its gross financing needs given the deterioration in global liquidity conditions, which could further increase the country's reliance on official inflows. 
Source: World Bank

Figures released by fDi Markets show that the Arab region attracted 1,092 greenfield foreign direct investment (FDI) projects for a total of $60.2bn in 2019, compared to 878 projects worth $82.7bn in 2018. As such, the number of greenfield FDI projects in Arab countries increased by 24.4%, while investments dropped by 27.2% last year. Egypt attracted $13.7bn in greenfield FDI in 141 projects, followed by the UAE with $13.6bn (445 projects), Saudi Arabia with $12.5bn (134 projects), Oman with $3.6bn (61 projects), and Morocco with $3.1bn (111 projects). Western Europe and the Middle East were each the source of $17.1bn of total greenfield investments in Arab countries. The Asia Pacific region  followed with $12.7bn, then North America with $9bn, Emerging Europe with $2.1bn, Africa with $2bn, and Latin America & the Caribbean with $189m. In parallel, the real estate sector attracted $9bn in greenfield FDI or 15% of the total invested in the region in 2019, followed by the renewable energy sector with $8.8bn (14.5%); the chemicals industry with $7.6bn (12.6%); the coal, oil & and natural gas sector with $7.3bn (12.1%); and the hotels & tourism sector with $6.2bn (10.3%). Also, Egypt, Saudi Arabia and the UAE were the destination of nearly all greenfield FDI made in the real estate sector last year, with $7.1bn, $1.3bn and $0.6bn respectively. Further, a total of 815 companies invested in Arab countries in 2019 compared to 705 firms in 2018, and the top 10 companies accounted for 5.4% of greenfield investment and for 4.1% of job creation last year.
Source: fDi Markets, Byblos Research