COVID-19 VACCINES INJECT FRESH LIFE INTO ECONOMY

The coronavirus crisis has clearly reared its head in the world, with more than 1.6 million people dead and over 35 million active cases.

Apart from the tragic loss of life, the global economy has also taken a hit with many businesses closing down and millions of people losing their jobs.

But new COVID-19 vaccines by Pfizer/BioNTech Inc. and Moderna Inc. pharmaceutical companies are now offering hope of a return to some form of normalcy next year.

The first vaccine shots have already been administered in the United Kingdom, Canada, and the United States, with the global rollout well under way, which has boosted public and business sentiment.

The most obvious driver of global growth would be the delivery of more doses of vaccine next year, most likely as a result of additional vaccines being deemed safe and effective. This would benefit emerging markets in MENA and elsewhere in particular.

Another factor could be a faster relaxation of restrictions than previously envisaged once vaccine rollouts commenced. Exit strategies remain unclear, but economies could start to gradually ease restrictions from March to April.

But even before the vaccine rollouts, the International Monetary Fund (IMF) had revised upwards its forecast for the global economy.

“We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” the IMF said in its latest global economic outlook. “The revision is driven by second quarter GDP outturns in large advanced economies, which were not as negative as we had projected; China’s return to growth, which was stronger than expected; and signs of a more rapid recovery in the third quarter.”

The IMF said global growth is projected to decline 4.4% in 2020, which is a less severe contraction than its June forecast, but also pulled back its expectation of growth this year.

“Global growth is projected at 5.2% in 2021, a little lower than in the June 2020 WEO (World Economic Outlook) Update, reflecting the more moderate downturn projected for 2020 and consistent with expectations of persistent social distancing,” the IMF said. “Following the contraction in 2020 and recovery in 2021, the level of global GDP in 2021 is expected to be a modest 0.6% above that of 2019.”

The Middle East economies are also feeling the coronavirus’ impact. But many affluent Gulf economies have tapped into international markets to raise debt and were able to quickly rollout monetary and fiscal support for businesses and individuals.

Meanwhile, other countries in the region bore the brunt of the health crisis. The IMF expects economic impact of the virus to be substantial, with the region contracting in 2020 by an average of 3.1%.

“Most countries have revised growth down by more than 4 percentage points in one year, equivalent to removing USD 425 billion from the region’s total output,” the IMF said. “For nearly all countries, these revisions are higher than those seen during the global financial crisis in 2008 and the oil price shock of 2015.”

GCC economies will contract 2.7% this year, then rebound 3.3% in 2021, according to the IMF forecast. The region’s non-oil economies will decline 4.3% this year, before bouncing 3.2% in 2021.

Meanwhile, the wider MENA region will see a 4.2% decline in 2020, and expand 4.7% in 2021.

Among regional economies, the UAE should see a lift with the staging of the six-month Dubai Expo event, which was shifted from this year. The IMF expects the UAE’s GDP to contract 3.5% in 2020 and claw back some gains by posting a 3.3% expansion in 2021.

“The postponing of Expo 2020 has limited the rebound in H2 this year, but it does create space for Expo Dubai to achieve its target and make a fuller contribution to growth next year,” the Institute of Chartered Accountants in England and Wales said in a report. “Expo 2021 should help visitor numbers to rebound next year, but international visitors are unlikely to return to pre-crisis levels before 2023.”

Among other major MENA economies, Egypt will be one of the few that will grow this year by 2%, and expanding 2.8% further in 2021, IMF data shows.

Djibouti is expected to see the largest economic expansion in the MENA region in 2021, rising 8.5%, followed by Iraq’s 7.2% growth, with Algeria emerging as the third fastest growing MENA economy enjoying an expansion rate of 6.2%, according to the IMF forecast.