Arab war-torn countries severely hit 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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The National
13 hours ago
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Lebanon's new government wins praise for first 100 days but there is a long road ahead
It is vital to look both ways now when crossing Riad Al Solh, a street in downtown Beirut between the parliament and the Grand Serail. In a highly secured zone, for years the only vehicles allowed through were those belonging to Lebanon 's military forces, MPs and the convoy of parliament speaker Nabih Berri racing to attend sessions. Now Riad Al Solh resembles a busy street again, as cars and motorbikes jostle for space. The area was closed off in 2019 amid a wave of anti-government protests, and concrete barriers were erected. While the wall was pulled down in 2022, restrictions still applied in the once-vibrant area that in recent years resembled a closed off fortress. The decision to reopen the area in a bid to restore life 'in the heart of the capital' was taken by Prime Minister Nawaf Salam and his new government, which came in following the election of President Joseph Aoun in January. It may seem like an almost inconsequential move in a country that already had such deep-seated problems even before Israel's war last year reduced vast swathes of Lebanon to rubble. But it was a step by the country's new leaders seeking a break from the past and trying to rebuild trust with a population reeling from economic crises, deep divisions, corruption and weak governance. Elected to fanfare, and led by the mild-mannered former ICJ head judge Mr Salam, how is the government performing 100 days after the cabinet gained parliament's confidence? 'It's not about being flashy' Diplomats and humanitarian officials have praised the government's practical steps in the face of the mighty tasks ahead. Multiple western diplomatic sources said they were optimistic about the Lebanon's new government and its genuine effort to make reforms, despite the pressure on it. 'It's not about being flashy,' said a senior humanitarian official in the country. 'It's about good realistic governance.' The source spoke of an increased climate of trust when dealing with the new government compared to its predecessor. 'It does have accomplishments it can be proud of,' Karim Bitar, a professor of international relations at Beirut's Saint Joseph University, said. He cited breakthroughs in the Beirut blast investigation, new appointments to the judiciary, the successful holding of municipal elections, including in areas where Israel continued to bomb, as well as the passing of a banking secrecy law and progress on reforms demanded by the International Monetary Fund to secure a $3 billion loan. The investigation into the 2020 Beirut port blast had been stalled by repeated legal impediments. Now it has not only resumed but the lead investigator has had his powers, which had been stripped by his own boss, fully restored. 'It seems the prosecutor is satisfied with the conditions under which he can act,' a senior government official told The National last month, noting that the investigation had resumed weeks after the arrival of a new government. The Lebanese Army has increased its deployment in south Lebanon as required by the Hezbollah-Israel ceasefire deal last year. Despite that, Israeli attacks on the south continue and they remain entrenched in five points of Lebanese soil. The humanitarian source gave the example of education as a sector that has long been underfunded and reliant on foreign aid. New operating procedures allow the monitoring of teacher and student attendance and the financial management of schools. Small steps admittedly, but this helps to improve confidence in institutions and allows for a stronger argument for investment in a sector long reliant on donors. The basic salaries of teachers have also been increased. While still less than before the economic crisis hit, the current pay level is more sustainable and not fuelled by ad hoc short-term measures, the source said. Daunting task ahead But while there is optimism and some progress, the task ahead is daunting. Hezbollah remains very much armed and a potent threat, despite the push to constrain it. Israel continues to bomb south Lebanon daily and occupy five points. On Thursday night, Israel sent thousands celebrating Eid Al Adha in Beirut's southern suburbs fleeing when it carried out multiple air strikes on the area. And there is no reconstruction plan for a country which needs at least $11 billion to rebuild. The reality is that 100 days are not long enough to undo so many years of damage, especially for a country whose economic crisis in 2019 was blamed on decades of financial mismanagement and corruption by the ruling elite. Gone are the heady days of 2018 when annual GDP was around $55 billion. Now it is less than half that. The billions of dollars of depositors' savings are still stuck in banks with no real plan to recover them. In the autumn, a major investor conference will take place in Beirut, where its hoped that international players will be shown that 'Lebanon is back in business'. But in a country where the effects of disastrous financial mismanagement, corruption and deep rotted instability are constantly felt, how can those from the largest institutions to the smallest business owner be convinced? 'There is no easy answer,' Economy and Trade Minister Amer Bisat told The National. He left his job in New York as the global head of emerging markets at the world's largest asset manager BlackRock to take up his cabinet role this year. 'We have to be realistic, there is no button we can push to go back. It's thorny and complicated.' Observers are also cautious. While progress is promising, it has been slow in some areas or non-existent in others. Crucially, with parliamentary elections only a year away, the cabinet has only around 12 months of its mandate left. 'Definitely the government is trying to do its job, it's arguably one of the best governments [in recent years],' said Prof Bitar. 'However, this government has a life expectancy that is relatively short.' While the senior humanitarian source was full of praise for the new ministers, they conceded that the deep-rooted state bureaucracy is still a nightmare. Bold, almost vague, promises by Mr Salam to finally implement the 1989 Taif Accord and respect the constitution have not happened. So while the government could be remembered as one that made important changes, it is one that has only so much time left. There are no guarantees Mr Salam will be Prime Minister after next year's elections. However, it is likely the traditional ruling parties will still be represented in parliament, and there are no guarantees that the well-intentioned steps this government has taken will be continued. 'I don't think that small and quick steps will bring back the confidence of investors,' said Mr Bisat. 'What will bring it back will be that investors know we are fixing these issues. 'I am certain of that, I am certain that if we do our jobs and [meet our] obligations, we will be able to bring the economy back. But we need to convince investors we are doing our homework. 'The good news is we've started, especially through the working plan that the Prime Minister, President and government has put forward of how we will address these files.'
