Arab countries at war hit hardest by US tariffs, says IMF
Washington's tariffs regime has had detrimental effects on world economies but the repercussions for Middle East countries struggling with conflicts are even worse, according to the regional director of the International Monetary Fund. For some countries in the Middle East and North Africa region, the impact of US levies compounded the shocks that have been jolting them for more than a year and a half, said Jihad Azour, who heads the IMF's Middle East and Central Asia Department. 'Especially where those [conflicts] were happening … Lebanon, Syria, the West Bank and Gaza,' said Mr Azour during a Sunday summit at the IMF's regional office in Riyadh. The impact of US tariffs that suddenly went from 5 per cent to about 30 per cent for many countries was telling. Those economies suffered, 'with losses of output that could exceed 50 or 60 per cent of GDP', he said, adding that the impact was even more severe for countries, whose economies were reliant on regional tourism as their supply chains were heavily affected. 'Egypt suffered because of uncertainty on the trade routes, $7 billion [that] they used to collect by the Suez Canal disappeared over less than one year,' he said in his opening address, identifying Jordan as another hard-hit country. Despite these pressures, Mr Azour said recent developments such as increased regional co-operation, private investment and the push for the development of AI could help these economies in crisis to grow out of their current fragile state. In February, the IMF announced the creation of its informal coalition with Arab nations and the World Bank to support the recovery of the region's countries devastated by war – the Arab Co-ordination Group. Today, the fund and its partners are focusing on areas of trade disruption, infrastructure investment, and using AI to accelerate private sector growth and regional co-operation to aid economies in crisis. 'The hope is that some of the conflicts could turn into a post conflict situation, and reconstruction and recovery will emerge' Mr Azour said. Gulf countries, of which many have gone through a transformation in the past eight to 10 years, are in a better position to take action to support the struggling economies in the region, he said. 'Doubling down to deepen those reforms and create a regional block that would become larger as a market and more effective as a convening group,' Mr Azour added. While some of the Middle East countries have faced the pressures of trade war market volatility and geopolitical upheaval, all these factors have affected nations around the world to varying degrees. The impact of the economic uncertainty on the global financial sector is multifaceted and deep, according to Jamal Al Kishi, chief executive of Deutsche Bank Middle East and North Africa. 'There is a general decline in sentiment in the [global] economy that definitely lowers growth', said Mr Al Kishi, during a panel titled Global and Regional Economic Developments and outlook. Investments are typically halted, consumption at times is curtailed in addition to the demand for loans, products and other financial services declining, he said. 'Banks typically witness decline in the quality of their loans when there's lower growth and higher uncertainty. Some households, some corporate clients, run into difficulty that begins to create non-performing loans, that causes banks to incur losses and higher provisions, and those are, of course, quite impactful,' he added. The culmination of all these issues usually lead to high interest rates from central banks and inflation, which are inimical to growth. These global factors are increasing the load on economies already under the pressures of geopolitical conflict, and regional co-operation could be a way back to growth, Mr Al Kishi said. Abdulmuhsen AlKhalaf, Vice Minister of Finance of Saudi Arabia, said the path to stability given the global economic headwinds and geopolitical uncertainty is 'through structural reforms that regional countries need to take to support their economies during these difficult situations'. Using the example of the kingdom, he said Saudi Arabia was able achieve 52 per cent of its economic output from non-oil activities to achieve its Vision 2030 goals. 'This give us … enhanced our resilience, and now we are facing this external shock from a position of strength,' he added. The region's recent push for AI is also having an effect, according to Bandr Al Homaly, chief executive of Jada Fund of Funds, an investment management company backed by Saudi Arabia's sovereign wealth fund. 'Technology overall can accelerate economic development with the democratisation of technology. The potential is huge, interconnected, and inclusive and private markets [that] will increase deal flow,' he said. This was made possible with low barriers to entry, more accessibility to data, and the decentralisation of innovation hubs, said Mr Al Homaly. 'Innovation now can occur in unexpected places in the world not necessarily in Silicon Valley or other traditions hubs,' he said.
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