Mena region ‘on path to robust recovery’

MANAMA: Growth in the Mena region will see a robust recovery of 3.6 per cent in 2021 from negative 5.5pc in 2020 based on a strong rebound seen in Q3 this year, according to a report by Mitsubishi UFJ Financial Group (MUFG).

The Japanese bank holding and financial services company said it is more optimistic about regional prospects than the past despite the fact that new recorded Covid-19 cases in the Mena region have trended upwards since the beginning of September, with notable increases in Iran, Iraq and the UAE.

At least some of the increase in recorded cases across the region appears to be due to more widespread testing: while there has also been a rise in Covid-related fatalities in some countries, this increase has been much more limited than the rise in recorded cases.

Moreover, in gauging the potential economic damage from this ‘second wave’, it is notable that the tightening of lockdown measures has so far been less strict than during the ‘first wave’ at a national level.

Though the situation is fluid and it appears likely that the sharp increase in new cases will somewhat stymie the recovery in many economies, MUFG’s base case continues to assume that the region is on a path of tentative and occasionally interrupted re-openings, rather than witnessing further iterative waves of the pandemic that forces a return to draconian lockdowns.



Authorities are attempting to strike the delicate balance between limiting further damage to their economies weighed against health risks.

However, that does not mean there will be no lingering impact on consumer behaviour from the pandemic or no permanent economic damage from the measures put in place to contain it.

MUFG forecasts point to a region which, by end 2021, has a level of activity that is not just well below its pre-pandemic growth trajectory but, in many cases, still below its end 2019 level.

On net, the region has grappled with shocks to both the demand-side (Covid-19 induced consumption evisceration) and the supply-side (lower oil prices and oil production curbs).

Facing either one of these shocks would be unprecedented. The combination of the two, signals an acute contraction.

However, our confidence in the capacity to weather the losses has strengthened recently – primarily given the firming in global oil markets and corporates learning to live and embrace the virus.

While sequential growth appears likely to weaken materially in Q4, the recovery in monthly data for PMIs and a host of consumption indices points to a much sharper initial rebound in Q3 than we had been anticipating.

Even if sequential growth slows significantly in Q4 as a result of the ‘second wave’, the fact that the level of GDP appears to have already recovered much of the output lost in Q2 creates a significantly positive starting point for annual growth in 2021, said the firm.




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