“Path to Recovery is expected to be long, divergent”- IMF
The International Monetary Fund (IMF) has said that the path to recovery in 2021 is expected to be long and divergent, with focus on the Middle East and Central Asia Region.
The IMF revealed this in its most recent Regional and Economic Outlook Update.
“A year into the coronavirus (COVID-19) pandemic, the race between vaccine and virus entered a new phase in the Middle East and Central Asia, and the path to recovery in 2021 is expected to be long and divergent,” said the IMF.
The coronavirus (COVID-19) crisis led to a surge in government debt and financing needs as many countries in the Middle East and Central Asia reacted swiftly to mitigate the pandemic’s impact. Although several of these countries successfully accessed international financial markets, domestic banks covered a significant share of emerging markets’ financing needs, further expanding their already significant exposure to the public sector.
By contrast, most low-income countries (LICs) had a small response to the crisis because of financing and policy space constraints.
❗ 2021 is the year for countries in the #MiddleEast, #NorthAfrica, #Caucasus, and #CentralAsia to step up. Their policies need to build a recovery that creates inclusive, resilient, and greener economies.
Read our Regional Economic Outlook to learn how: https://t.co/zug4lvLbAc pic.twitter.com/cclMdww686
— IMF (@IMFNews) April 24, 2021
Looking ahead, public gross financing needs in most emerging markets in the Middle East and Central Asia are expected to remain elevated in 2021–22, with downside risks in the event of tighter global financial conditions and/or if fiscal consolidation is delayed due to weaker-than-expected recovery.
However, further reliance on domestic financing will reduce banks’ ability to support the private sector’s emergence from the crisis, thus prolonging the recovery. Credible medium-term fiscal and debt management strategies, together with policy actions to develop domestic capital markets and mitigate banks’ overexposure to the sovereign would reduce financing risks, address the elevated debt burdens, and entrench financial stability.
“…2021 will be the year of policies that continue saving lives and livelihoods and promote recovery, while balancing the need for debt sustainability and financial resilience. At the same time, policymakers must not lose sight of the transformational challenges to build forward better and accelerate the creation of more inclusive, resilient, sustainable, and green economies,” it added.
Amaka E. Nliam