Transcript

Transcript of the October 2021 Annual Meetings Middle East and Central Asia Department Press Briefing

October 19, 2021

PARTICIPANTS:

JIHAD AZOUR
Director, Middle East and Central Asia Department

WAFA AMR
Senior Communications Officer, IMF

(6:00 a.m.)

MS. AMR: Welcome, everyone, for joining the press briefing on the Middle East and Central Asia Regional Economic Outlook. I am Wafa Amr with the IMF communications department. Joining me today is IMF Director of the Middle East and Central Asia Department, Jihad Azour. Jihad will begin with brief remarks and then we will turn to your questions. Jihad.

MR. AZOUR: Good morning and welcome to the 2021 IMF Annual Meetings. Since the beginning of the year, the Middle East and Central Asia regions have made good progress and the recovery is ongoing despite the new outbreaks. Yet the recovery is uneven and uncomplete and has to fully hold throughout the region. In addition, the overall environment remains uncertain, and new challenges are emerging. I'd like to offer a snapshot of the overall outlook for the Region.

We project real GDP for countries in the Middle East and North Africa(MENA) to expand by 4.1 percent in 2021 and in 2022 after contracting by 3.2 percent last year. Real GDP growth in the countries in Central Asia is projected at 4.3 percent this year and 4.1 percent in 2022 following a contraction of 4.2 percent last year. This is a mark improvement from last year's sharp contraction, yet the recovery has been uneven. The success of the vaccine rollout varies widely with low-income countries and fragile and conflict-affected states showing limited progress.

Going forward, concerns about economic scarring and divergent recovery persist. Over the interim, the GDP is expected to remain below pre-crisis projections by around two and a half percent in MENA and seven percent in the Caucasus and Central Asia (CCA). Countries that manage to recover more quickly will also have lower outlook losses. At the same time, the employment recovery remains weak and rising inflation is reducing the ability to use monetary policy to spur growth. In addition, risks have increased with the renewed uncertainty around new pandemic waves, vaccination delays, tighter global financial conditions, social unrest, and geopolitical risks as well as climate shocks.

Inequities are on the rise with young people, women, and migrant workers as well as small companies bearing the brunt of the crisis. To address these issues, our regional economic outlook takes an in depth look at two critical issues facing the region: the state of the labor market and the pandemic's impact on the corporate sector. The region's unemployment rate worsened last year, particularly for workers in contact intensive sectors. The average unemployment rate for the Middle East and Central Asia rose to 2.7 percent in 2020, far exceeding rates than during other recent crises. We examined the full scope of the region's unemployment challenges and advised policies to improve outcomes including for young people through higher growth and strong labor market response to the growth.

Our report also assessed the impact of the crisis on the region's corporate sector and found that these firms are not recovering equally even though the corporate sector has gone back to pre-pandemic levels. Smaller firms and those in contact intensive sectors in particular are lagging behind. With digital enabled firms, those with strong precrisis fundamentals were able to mitigate the pandemics impact. With limited policy space, recovering from the pandemic will require countries to manage difficult policy tradeoffs. Accelerating vaccine acquisition and distribution, particularly by low-income countries remaining the most urgent priority and will require strong goodwill and regional cooperation.

In the meantime, policy support should target the most vulnerable and the eventual withdrawal should be gradual and well communicated. If inflation proves persistent, central banks will need to adjust policy rates; including policies to prevent the de-anchoring inflating expectations. Improving policy framework will be important to reduce tradeoffs and bolster credibility. For example, when fiscal adjustments occur, they should be anchored in a credible medium term fiscal framework that clearly illustrates debt sustainability. The current situation could prove to be a transformational moment for the region as it looks ahead to a more inclusive, resilient, and greener future. We are encouraged by the fact that several countries are planning to invest in their future by reorienting the role of the state toward health and education, expanding social safety nets, and incentivizing digital and climate resistant technologies.

The IMF continues to engage closely with the region's countries to provide policy advice and technical support as well as $20 billion dollars in financing since the beginning of the crisis. The Fund has also allocated $49.3 billion of special drawing rights to supplement the region's reserve assets, a step that will help countries cope with difficult policy tradeoffs and accelerate their recovery. More details can be found in our regional economic outlook which was published this morning and we invite you to join us tomorrow for a webinar highlighting our outlook for the MENA region.

Our discussion will feature a distinguished panel of experts, moderated by CNN International's Becky Anderson. We will also have events spotlighting the caucuses and Central Asia and our chapters on labor market and on the corporate sector in the week ahead. With that, thank you very much and I'll be happy to take your questions.

MS. AMR: We will now take your questions. To ask a question directly, you can use the raise your hand feature on WebEx and type your name on chat or submit questions on the IMF presenter. We can take questions in Arabic, English & French. There will be simultaneous interpretation as well. So, we will go to the first question. We have a question from a Tunisian Newspaper. She would like to ask about the recovery. What does the recovery in the Middle East and North Africa look like?

MR. AZOUR: Thank you Wafa. As you know [we are] where countries have succeeded to address the shock of COVID, both in terms of protecting lives and livelihoods having to support important measures on a fiscal monetary and financial in order to floor the shock and protect their economies. And recently we saw the acceleration of vaccinations. Therefore, countries who have succeeded in vaccinating quickly were able to recover faster and since the beginning of the year, we see economies improve. Of course, this recovery is not the same in different countries. Why? That is because vaccination is different between countries. Those who have vaccinated first, are able to recover faster. In addition to that, we started seeing a certain number of global developments that are affecting the economies of the region. Inflation for example, especially the increase in food prices is affecting also the social situation in the region. The third development we are seeing today is the fact that this crisis is going to leave scars—scars on the labor market. We expect unemployment to move up by one and a half percent. Also, we expect this crisis to have an impact on contact intensive sectors like tourism and small and medium size companies. Therefore, where we stand today, there is an economy in better shape than last year, but an economy that still needs to address a certain number of issues to have the recovery that will have the economy to grow faster and by growing faster, to reduce unemployment to address, also, a certain number of risks like debt that has increased over the last year. And gradually work on reducing it through gradual fiscal consolidation. Also wit depends on the situation of each country. But also, a recovery that will help a [shore up] the future.

And this is where our report this year is highlighting the importance of investing in industries of the future. And it will help the generation below the age of 30, which is 60 percent of the population take full hold of the future and also will help us address the inclusion issues because one of the implications of this crisis is that women, youth, and people who are in the informal sector suffered more than others. Of course, the global economic environment is also dictating the number of challenges. Any change in the global interest rates and the trends in the global financial markets could have an impact on the countries of the region, especially those who access international financial markets.

MS. AMR: Thank you very much Jihad. We have Khedije Benselmi, TAP you're next. Please ask your question.

QUESTIONER: Hello.

MS. AMR: Yes, we're waiting for maybe the question.

QUESTIONER: Can you hear me?

MS. AMR: Yes, please go ahead.

QUESTIONER: The IMF has expressed on more than one occasion its readiness to help Tunisia overcome the economic and social crisis, but it has restricted it to conditions that seem socially impossible and costly for Tunisia. What alternative can be found other way a new government to enable the country to overcome this critical juncture, especially after the deterioration of its credit rating.

MR. AZOUR: Thank you very much for your question. Well, first of all, the Fund has been supporting Tunisia over the last several years, and more recently, since the outbreak of the COVID crisis, you know, the Fund has provided Tunisia with $1.4 billion, seven hundred, fifty million, immediately, a few weeks after the outbreak of the COVID-19 last year in April and recently with the SDR location. And Fund staff has been in regular contact with the authority to provide an addition to financial assistance, technical assistance, and policy advice.

We are, of course, observing this situation and the political development, and our team in charge of Tunisia has been in contact with authorities in order to get additional information on the reform plan and the policies that your new government is envisaging. And I, personally, also have a meeting in the coming days with both the minister and the governor of the Central Bank.

Of course, the Fund is supporting Tunisia and ready to provide additional assistance. This, of course, should help Tunisia address the challenges that the economy is facing. In addition to the big impact that the crisis had on Tunisia, the slow recovery is also due to the fact that the vaccination took some time to kick off.

The priorities are well known. It's very important to increase the level of both, and this needs to happen by reducing the [output] of public spending on the economy, reforming SOEs, helping the private sector to grow, especially the small-medium size enterprise, by increasing investment and reducing the act of increasing prices and inflation on the economy.

MS. AMR: Thank you, Jihad. We're going to stay on Tunisia. Just one more question, in Arabic. [journalist]

QUESTIONER: From the National Television of Tunisia. What is needed to reach an understanding, an agreement with IMF?

MR. AZOUR: As you know, a government was formed last week, and we are in touch with the Tunisian authorities. It's up to the Tunisian authorities to request assistance from the IMF through a program, and this will take place based on economic plan and reform projects that the Tunisian government would like to implement. We are in constant contact with our peers in the government, ministry of finance, or the Central Bank of Tunisia.

MS. AMR: Mustafa Azim from El Ettihad Newspaper. Mustafa, please go ahead and ask your question.

QUESTIONER: Please allow me to speak in Arabic.

MS. AMR: Go ahead.

QUESTIONER: Thank you. Your expectations as far as the growth and the United Arab Emirates, particularly the non-oil sector in 2021, in light of the noticeable growth in certain sectors such as aviation, tourism, trade and the Expo 2020. What is your expectation, in general, for Dubai and Abu Dhabi in particular?

MR. AZOUR: Thank you for the question. As you know, the United Arab Emirates quite quickly has managed to protect the economy against COVID and adopted a number of measures that helped reduce the spread of the COVID and reduce its impact on the economy through a number of measures. Financial measures through the budget and fiscal measures, and monetary measures, and the Bank, and financial sectors. There is no doubt that accelerating the vaccination, and UAE was one of the first in the world, helped reduce the impact of the COVID which helped return recovery. We've seen noticeable improvement in the economic life and its return to economic activity, particularly in the non-oil sectors.

In addition, Expo 2021 will be a leverage for economic activity in 2021. The IMF expects that there will be growth in the non-oil sector, 3.1 percent to 3.2 percent for the UAE economy; and we expect this economic improvement to continue next year backed by the gradual increase in the oil price and productivity as well. Thank you.

MS. AMR: We have Omar Achy from Map News Agency]. Omar, please go ahead and ask your question.

QUESTIONER: Can you hear me?

MS. AMR: Yes, we do.

QUESTIONER: Okay. Thank you very much, Mr. Azour, does all for this briefing. May I ask my question in French, if I may, and I hope I get to.

So, my question is about Morocco and the perspectives for growth in Morocco. You did mention Morocco in your report as being one of the countries that has progressed well in vaccinations. What are the perspectives for Morocco and for the partnership between the IMF and the government in Morocco?

MR. AZOUR: The report this year shows that Morocco has reacted efficiently, most efficiently, to fight this crisis. Indeed, after some measures that were fiscal, monetary, and financial the economy succeeded last year in limiting the impact of the crisis. Moreover, Morocco did succeed in transferring five million people from the informal sector into social measures. So, the quickness of vaccination and all the measures that were taken for limiting impact did get Morocco to a quick recovery in 2021.

The growth will be 5.7 percent this year that will compensate the infraction that Morocco saw last year. With this recovery, it will be strengthened in the future because the figures of growth in exports is very strong. The agricultural sector, which is a very important activity in Morocco, will form a strong recovery this year, also. The capacity for the economy in Morocco to recover in a regular activity will be shown and will be a reality. This is the result of policies that were implemented, and after the fight against COVID with an acceleration in vaccination.

As of today, the IMF and the relationship between the IMF and Morocco is very strong. It's very important that dates back in time, the IMF supporting Morocco in transformation and reform; and last year, the IMF did give Morocco $3 billion for a prudential line of credit. This means that Morocco reinforced its liquidity but also is a signal to the market which enabled Morocco last year to come back on the capital market with great success and with an assurance. As you know, the IMF assured within the framework of distribution of SDR of $650 billion did give a chance to Morocco which reinforced its liquidity, improve resources, and enable Morocco to face the scarring after this crisis.

MS. AMR: Please turn your cameras on when asking questions. It would be good to see your faces. So, we're going to be turning to some questions that we have been receiving online, and we'll move to the Central Asian region. We have questions from Nutsa Shubashvili (Maestro TV). Georgia’s government's new projection for this year GDP growth is 9.5 percent. Your latest projection for Georgia was 7.7 percent. Are you going to revise your projection also, or do you think that government's projection is optimistic? What are the main risks for recovery?

MR. AZOUR: Why, thank you for the question. Georgia has been heavily affected last year by the COVID-19 shock and the impact of the crisis on its economy. Georgia is an open economy where the tourism sector constitutes an important portion of the GDP. Therefore, the authorities took very strong measures last year in order to address those shocks and their implication on various economic sectors.

Recently, we saw an acceleration of vaccination that had to, in fact, address the gap that existed in the beginning of the year in terms of fighting the COVID-19 crisis, and with that, improve the economic prospect. Of course, for an open economy, the impact of the shock was big, but the good news is we see a V-shaped type of recovery for this year, and we expect the growth to be at 7.7 percent.

But as you know, in those kind of recoveries, there are still uncertainties. And therefore, it's very important to be vigilant, and to address some of the issues that surface over the crisis. Measures that were introduced had to cushion the impact of the crisis to use the blunt of the shock on the economy.

It's important to pursue. And we are encouraged by the fact that the new government is pursuing a reform agenda with an objective to increase the competitiveness of the economy, and also by addressing some of the issues that surface like in formality during the crisis to maintain the speed of growth.

In addition to that, central bank has introduced measures in order to keep inflation under control, limit the impact of the crisis on the economy, and maintain an overall monetary stability. The measures that were introduced to provide support to the economy will gradually be focused and unwound in order to have more impact of those measures on the impacted sector and gradually normalize and recover.

MS. AMR: Thank you, Jihad. We have another question on Central Asia from Reuters. What are the Funds' views on how vaccinations have been progressing in the CCA region? Is the investment climate getting better?

MR. AZOUR: Thank you. In fact, this is an important issue. And as we see in other parts of the world or in the region, vaccination was uneven. We have countries who have accelerated vaccination and started very soon, and those who succeeded in having a multiple source of vaccines were able to have a faster vaccination process and recover faster.

And, of course, we have some countries who very quickly, like Kazakhstan and a few others were able to accelerate vaccination and reduce the impact of the COVID crisis, and therefore, their economy recovered fast. Some are a bit slow, all relying on one or two sources of vaccination. Vaccination is key because vaccination helps not only to protect lives, but gradually reopen the economy.

In addition to that, we also saw several countries introducing measures to address the impact of the crisis on several sectors. We saw countries like Uzbekistan, Kazakhstan, Georgia, Armenia, and others taking important measures and important steps in this direction.

Of course, this crisis has an impact, especially in countries where informal sector is high. This is something that we recommend to address and improve this issue of reducing the level of formality, preserve macroeconomic stability, and more importantly, especially at this juncture, address the impact of inflation that has been most of the increase in food prices, having an impact on low income groups and vulnerable groups in the society.

MS. AMR: Thank you, Jihad. We have Mirsaid Ibrahimzade from APA Azerbaijan who wants to ask his question. Could you please turn your camera on when you ask? Please go ahead.

SPEAKER: Hello. Thank you, everyone for arranging this kind of event for journalists and everyone. I'm sorry I'm experiencing some kind of malfunction with my camera. I can't turn it on, but I can stay in touch through. So, my question is going to be regarding the economic growth. Which sectors could be the main drivers for economic growth next year? And what do we think? Which measures can be taken to combat rising inflation?

MR. AZOUR: Well, thank you for much for your question. Of course, this situation is different between oil exporting and oil importing countries. As an oil exporting country, oil will play an important role last year. Azerbaijan, like other countries in the region, suffered the impact of the COVID shock last year, and the economy contracted.

And this year, we project growth to be positive and the economy to recover at a rate of 3.4 percent. Of course, the recovery is driven by the non-oil sector, and with an acceleration of vaccination, and measures that the government has introduced last year. Some of them were fiscal measures, some others were financial measures, helped protect the economy and accelerate the recovery. Since the beginning of the year, we see the economy improve.

Gradually, with increase in oil production and the relaxation of the limitation of the OPEC plus agreement, we will see combined with increase in oil price increased in the oil GDP. This, of course, will help improve, also, the foreign reserves, the current economic situation, and reduce the level of budget deficit.

As the recovery progressing, gradual, I would say, recalibration and unwinding of some of the stimulus measures that were introduced last year will be welcome. This will help the economy to stabilize and reduce any impact on the fiscal situation.

As per inflation, as you know, inflation is expected to peak this year in the region, and we expect a gradual decline next year and the years to come. Of course, the nature of this inflation is affecting social groups and those who are, in fact, with low income. More because it's driven by increase in food prices, and therefore, it's very important that central banks maintain vigilance and to avoid any de-anchoring of the inflation expectations, and when needed, use interest rate measures in order to protect the economy from high inflation.

MS. AMR: So, I can take Fayaz Hussein from MG news has a question. Jihad, I can read that for you. Can Mr. Azour comment on the Pakistan program and the status of ongoing talks for the resumption of the EF facility?

MR. AZOUR: Thank you, Fayaz. Fayaz as you know, the IMF mission to Pakistan and the authorities are currently in the process of the discussion around the sixth review of the program. And the discussions are progressing around the various pillars of the program and the measures that they government of Pakistan is currently contemplating. The progress has gone in a very good step and the mission with the authorities are going through the various details.

MS. AMR: We're moving back to the Middle East and North Africa, and we have with us [Babu Das] from Gulf News. Go ahead, please, Babu. Ask your question.

QUESTIONER: Good afternoon, Wafa. Good afternoon, Jihad. The question I have is about one of the concepts you had listed in the report on the private sector economy, particularly in the GCC region, liquidity and solvency. You know, many of them entered the crisis with a substantial leverage on their books. Through the crisis, they were supported by the governments and through central bank measures.

Now, many central banks are gradually planning to [inaudible]. What's your reading on this, and how is this going to affect the private sector in the region?

MR. AZOUR: First of all, as you know, central banks and ministries of finance introduced strong packages. And the situation is, of course, differing between countries. Our research here is showing that the impact of the crisis on the corporate sector is going to be different based on the type of the sector and the size of the corporation.

The crisis will affect more small and medium sized companies, and it will affect their liquidity. Broadly speaking, we foresee that the overall oil sector will recover this year by the end of the year. The ground, of course, lost before the crisis, but we see, in fact, divergence between different types of companies. And this is where policies are very important to be calibrated in order to focus on the companies and the sectors that were more affected.

Of course, high contact intensive sectors are more affected than the rest. Sectors where technology plays an important role were able to recover faster. In our analysis, we are expecting that around 12 to 15 percent of corporations will face some liquidity issues, and some of them will need to be restricted or closed.

But with the packages that were introduced and the recovery, in particular in the Gulf, and because of the acceleration of vaccination, we see the recovery in a certain number of sectors. And more recently, because of the increase in oil price and oil activity, this will limit the impact of these shocks on the corporate sector.

The second question will be: what is the impact on the financial sector? And here, so, our study is showing that the impact will be limited. Some sectors will have an impact on individual banks. But, by and large, banks in the region entered the crisis with a good level of capitalization, high level of liquidity. And the various measures that were introduced by the central banks to provide them with more liquidity helped them, in fact, withstand the crisis and provided them with a needed cushion.

Therefore, going forward, recalibration of the measures gradually, and addressing the transformation of the corporate sector will help countries, on one hand, recover. And on the other hand, avoid any, I would say, permanent or long-term scaring from the crisis.

MS. AMR: Thank you, Jihad. We're turning to Lebanon. We have a question from Magaly Abboud, L’Orient Le Jour, please go ahead.

QUESTIONER: Yes. Hi. I have two questions [inaudible]. Now, that the minister is [inaudible], and I was wondering if the negotiation [inaudible]. Can Lebanon have -- can the IMF [inaudible] knowing that the establishment might change in the end of March due to the elections? Thank you.

MS. AMR: I believe the first question was --

MR. AZOUR: Yes. Could you repeat the question for me?

MS. AMR: Yes. Will the negotiations between Lebanon and the IMF still begin in November, as the Minister of Economics and Trade announced two weeks ago?

What was your second question, [Magaly]? Because your voice was not very clear?

QUESTIONER: Yes, [inaudible] and the second question was if they do meet and we do have a negotiation with the IMF, can the IMF [inaudible] elections in March [inaudible].

MS. AMR: So, the question --

MR. AZOUR: On the next election.

MS. AMR: If the cabinet does meet --

MR. AZOUR: Yes. Magaly, thank you very much for your question. As you know, the Lebanese government, through a letter sent by the Prime Minister, has requested reengaging with the Fund in the context of a potential Fund support to Lebanon.

And since the Lebanese team has been in contact with the team at the Fund, the Lebanese team at the Fund has been in contact with authorities in Lebanon, both the ministry of finance, the central bank, minister of economy, and other public sector agencies in order to start their discussions.

Where we are currently: we are currently at the step of updating the numbers, hearing from the Lebanese government what are the reform priorities, and what is the government plan. Those consultations are ongoing, and technical discussions are progressing. Of course, based on the reform program of Lebanon, a potential Fund assistance will be awarded.

On your second question, which is related to the first one, in fact, the Fund deals with Lebanon and with the authorities, and this is something that goes beyond election. Because, as you know, Lebanese have a comprehensive reform, long-standing issues, financial issues, fiscal sustainability issues, economic recovery, social, especially with the increase in prices, and the sharp deterioration of social conditions. And for the program of reforms will need some time. We are currently in active discussion and consultation, and as we progress, we will communicate on how things are.

MS. AMR: Thank you, Jihad. We have a question on Egypt from Sabry Nageh, Al Sharq al Awsat. What are your estimates of the repercussions of the current energy crisis and the rise in oil and gas prices in Egypt?

MR. AZOUR: Well, this is an important question. And I would say I would like to tackle it more on the region. As you know, oil prices for a region that has oil exporters and oil importers have different impacts. Of course, it will help oil exporters gradually because of the [OPEC plus] agreement. This will take time, but for the oil importers, it will increase their structure and will have an impact on the current economy.

And therefore, it's very important for oil importing countries to pursue what they have initiated years ago which is gradually reduce the subsidy system and move more into social protection schemes. And if I take the case of Egypt, this is what Egypt started to do back in 2016. Egypt, back in 2016, with the support of the IMF has started to unwind some of the inefficient and untargeted subsidies and moved more into more effective programs that have helped the impact of the crisis on low income and vulnerable groups. Going into this direction will constitute, also, an important step forward.

The second important element to do is to keep prices under control, and this is the role of the central banks to monitor, calibrate, and make sure that inflation is under control. As in the case of Egypt, although we saw increasing prices globally, we still see that the pickup in inflation in Egypt is under control, and the policies introduced by the central bank are helping to reign in any of the price increases.

Of course, we expect that this increase in prices to be transitory, and that starting next year prices will go down. But here, I think it's very important to highlight the nature of this inflation, and the importance of addressing some of the side effects. Because food price type of inflation is very important to protect vulnerable groups, women, youth, those who are in the rural areas, those who are in informal sectors.

And this is why we call for improving the structure of the labor market to accelerate through the recovery employment, especially since we saw increase in unemployment. But also, to address some of the impact of this crisis on vulnerable groups.

MS. AMR: Thank you, Jihad. We're staying on Egypt. We're taking a question now from Ibrahim Maamon from Middle East News Agency. Ibrahim please go ahead and ask your question.

QUESTIONER: Hello. Thank you for allowing me to ask a question. The Egyptian economy has been hit by COVID-19 like many countries during the past two years. Will Egypt's economy be able to survive a third year in 2022, or will they resort to have a third loan from IMF? And I want to ask about the main risk facing Egypt's economy. Thank you.

MR. AZOUR: Thank you very much. Well, Ibrahim, as you know, Egypt was among the few countries that is able to maintain positive growth last year during the COVID-19 crisis, and the Egyptian economy is gradually recovering. In parallel to that, also Egypt was able to maintain a strong level of reserves and a high level of liquidity at the banking system and maintain a stable and positive primary balance in the budget.

Of course, this crisis had an impact. It had an impact because of the nature of the economy. Unemployment went up, certain sectors like tourism were more affected. And as you know, Abraham, the Fund has responded very quickly in supporting Egypt last year. We have provided $8.5 billion of financial assistance to Egypt in the beginning of the crisis through a rapid facility, and then also through a complementary program, a stand-by arrangement. And this year with distribution of SDR, Egypt will get around $2.8 billion, which is more than $10 billion since the beginning of the crisis. This is the total amount of support that the Fund has provided to Egypt.

Going forward, what are the challenges? The challenges are, first, the challenges of many other countries. Vaccination. It's important to accelerate vaccination to limit the impact of potential future waves on the society, protect lives is still the first priority. Protecting livelihoods in Egypt. Tourism and a certain number of service sectors are very important. Protecting those is also allowing the economy to recover faster.

This is an important priority and the measures that were introduced by providing support to SMEs through different liquidity facilities were steps in the right direction. Of course, as the recovery accelerates, it's important to gradually unwind and consolidate. Unwind some of those measures and consolidate the public finance in order to rebuild buffers.

But I think what is very important for Egypt going forward is structural reforms that will allow Egypt to create jobs. Why are jobs important? Because we need at least between 700,000 and 800,000 new jobs per year. And those jobs can only be created by the private sector. And for this to happen, we need to increase productivity, and, also, we need to increase access to the market, access to talent, access to lend, and access to finance.

We also need to allow small and medium sized companies to recover. And this what we look forward in our cooperation with Egypt to see. In fact, this was one of the pillars of our programs since 2016.

MS. AMR: We have about one other question from Ismail Hamad, and then we will move to online questions. Ismail, please go ahead and ask your question.

QUESTIONER: (Speaks in Arabic.)

MR. AZOUR: The other question also applies to Egypt and other countries in the region. The changes that we see in the global financial markets should be an entry point for our countries in the region to avoid the risks experienced by emerging markets in the past.

So, it's important and despite the ability of countries to access financial markets, there should be caution about any change in financial policies and interest rates, global interest rates. We urge those countries to have flexible, targeted financial management measures to reduce deficit, enhance resources, and gradually handle the debts in addition to adopting an effective policy that will not only reduce debt, but the debt service in the month and years to come.

In addition, it's important to improve domestic financial markets. And here, we see a number of positive measures adopted by a group of countries. In the case of Egypt in particular, there is a plan to set up a debt management apparatus and to institutionalize this issue. This would improve trust by investors, definitely.

The macroeconomic management remains the main protective source of protection for the economy by reducing deficit, increasing growth, conservative financial management, and gradually reduce the level of debt. Thank you.

MS. AMR: We will go to questions online. We have one question from Yemen. How could we achieve the objectives from the allocation of the SDR and what are your expectations of Yemen?

MR. AZOUR : As you know, the relationship between Yemen and the IMF, the IMF has always looked for cooperation and support despite the extremely hard humanitarian conditions facing Yemen. As you know, last year, the IMF secured a grant to Yemen to assist the Yemeni authorities deal with the pandemic and reduce the impact on Yemen economically and socially.

There is no question that the crisis last year had a massive impact on the Yemeni economy. The economy retracted or contracted by 80% last year. The improvement will be gradual. Unfortunately, the growth will be negative this year but that's 2 percent less than last year. We expect the SDR will help reduce the agonies of the Yemeni people; and we hope these SDR's will be used to accelerate this nation reduce the spread of the COVID-19 and provide better health protection and, hopefully, expand social [inaudible] network.

The security, the domestic security developments have had a negative impact on people and, particularly, the hard-hit people.

One question.

MS. AMR: From Ahmed Fadhli from Lusail newspaper and Qatar News Agency. What are your expectations for the Qatar economy?

MR. AZOUR: Well Qatar, among the various cities in the region was one of the first to have accelerated vaccination rates in addition to the various measures that were introduced last year to reduce the spreading of COVID and limit its impact on the economy. And this helped the Qatar economy to recover starting the beginning of the year and after a negative growth. This year we expect growth this –- an active growth last year, we expect the economy to enjoy a positive growth of 3 percent this year.

Of course, this is also, been driven by the big investments that are made, and were made, in preparation of top 22 that is expected to help accelerate the non-oil recovery this year and next year. Of course, the increase in the price of hydrocarbons, the quadruple of the price of gas, and almost the doubling of the price of oil since the beginning of the year will contribute to improve the overall macroeconomic indicators of Qatar will help shift the balance of payment to surplus, and also will help reduce the level of budget deficit and turn it gradually to a surplus and will improve the current account.

Of course, gradually, when the recovery will strengthen, it's important to start unwinding and reduce the measures that were introduced and focus them only on the sectors and the activities that were the most affected, allowing the economy to grow. The recent opening between different countries in the GCC also offers opportunity for the Qatar economy to expand and to attract additional investment.

MS. AMR: Thank you. Our next question is on Saudi Arabia. It will be in Arabic.

QUESTIONER: From Ikrami Abdullah from Saudi Economic Newspaper in Saudi Arabia. What is the IMF outlook for the Saudi economy?

MR. AZOUR: The Saudi economy, since the beginning of the year and the last quarter of last year, has seen an economic recovery thanks to the non-oil sector which contributes considerably to setting the economic wheel in motion; and this is thanks to the measures taken last year to reduce disease of COVID and vaccination in addition to other measures taken by Saudi Arabia in terms of supporting different sectors; and also by the Saudi monetary organization to increase the level of liquidity for the private sector to assist them in facing this pandemic.

Our forecast for Saudi Arabia economy, this year, were higher compared to our expectations in April of 2021. We expect there will be a positive growth, 4.7 percent for the non-oil sector. As regard the oil sector, we have to take into account that reducing the revenues because of a reduction in oil output by one million barrels per day had an impact. We expect the oil sector to improve gradually as productivity goes up through the OPEC+ agreement and the flexibility it provides. We expect the oil sector to have a bigger contribution in the economy next year.

These changes, in addition to the financial measures adopted by Saudi Arabia in terms of increasing the value-added tax and other measures, this improved the Saudi budget and enhanced reserves. We expect a gradual reduction in the budget deficit and a return to foreign currency reserves, higher foreign currency reserves, and a surplus in the balance of payment in the next year.

MS. AMR: Jordan. (In Arabic).

QUESTIONER: [journalist] from Jordanian News Agency. What are your expectations for the Jordanian economy in light of high unemployment?

MR. AZOUR: Jordan, like other countries in the region suffered the repercussion of COVID-19. The Jordanian government adopted effective measures to protect the lives of people. This allowed the government to reduce the spread of the pandemic and accelerate the vaccination, which also helped the aspired economic recovery.

Jordan, despite the difficulties, maintained a reform court which allowed the economic conditions to improve and enabled recovery this year. But like other countries, this crisis has led to a sharp increase in unemployment rates, over 24 percent, on average, in Jordan, compared to 19 percent last year. This requires the continuation of the government structure reforms to improve productivity, improve the ability of the private sector to create jobs. Here, the measures adopted by the Central Bank in Jordan to elevate liquidity and secure financing for small and medium enterprises which will help protect these enterprises and allow them to return to activities soon.

Finally, it's important to reduce the cost of productivity by reducing the energy cost and, here, the measures taken to improve the energy sector also reduce the labor cost for the young, in particular. All these measures will be helpful. We look forward to the new opening and regional cooperation with Egypt, Iraq, Syria, and other countries in the region. We hope that this will open or provide a bigger space for the Jordanian economy to return to gradual reform and recovery.

MS. AMR: And on that we will conclude the press briefing on the Middle East and Central Asia Economic Outlook, thank you all for joining, and we have our next press briefing at 8:00 a.m., Washington time. Thank you.

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