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