Growth in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region is expected to remain subdued at 2.4% in 2019 before recovering to about 3% in 2020, according to the World Economic Outlook (WEO) update report, released by the International Monetary Fund on Monday.
Multiple factors weigh on the region’s outlook, including weak oil output growth, which offsets an expected pickup in non-oil products, added the report.
The global economy is projected to grow at 3.5% in 2019 and 3.6% in 2020, 0.2 and 0.1 percentage points below last October’s projections, noted the report, adding, “Risks to global growth tilt to the downside. An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook.”
Financial conditions have already tightened since the fall and a range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given the high levels of public and private debt, said the report.
The potential triggers include a “no-deal” withdrawal of the United Kingdom from the European Union and a greater-than-envisaged slowdown in China, added the report.
The main shared policy priority is for countries to resolve cooperatively and quickly their trade disagreements and the resulting policy uncertainty, rather than raising harmful barriers further and destabilising an already slowing global economy, said the report.
Across all economies, measures to boost potential output growth, enhance inclusiveness, and strengthen fiscal and financial buffers in an environment of high debt burdens and tighter financial conditions are imperatives, said the report.
Emerging markets and developing economies have been tested by difficult external conditions over the past few months amid trade tensions, rising US interest rates, dollar appreciation, capital outflows, and volatile oil prices, mentioned the report.
“In some economies, addressing high private debt burdens and balance-sheet currency and maturity mismatches will require strengthening macroprudential frameworks. Exchange rate flexibility can complement these policies by helping to buffer external shocks,” noted the report.