IMF's Azour: Middle East going through severe developments

Well, of course the Middle East is going through severe developments politically and therefore there are certain number of developments that have escalated. The level of risks you have, the risk coming from the geopolitical tension. You have also risks emerging from the trade challenges that were exacerbated by what we see on the Red Sea and also the global issues that have an impact especially on the oil and gas markets. Despite that, the region is growing yet slower than what was expected and we see a bit an uneven recovery with parts of the region doing differently in terms of their prospects for 2024. There’s been a lot of instability already around the geopolitics and events over the weekend with a direct attack by Iran on Israel. What implication does this have because Iran’s no longer using proxies? Is there heightened chance now of a greater fallout for the region? Well, the the crisis so far has already had an impact on the epicenter and neighboring countries who were affected by trade and tourism. Broadly speaking, the impact on the oil and gas market was fairly limited, some volatility in the beginning and also limited impact on the financial markets. But it’s more I would say the level of uncertainty that has went up in a region where already we had a slowdown in FD is. And here the situation is different. Oil exporting countries, especially those who have buffers and who have already achieved low level of inflation, although this may have slightly more challenges for them, but they have the capacity to address it and also because they have growth in the non owned sector that is sustainable and sustained over the last few years. The emerging economies are in different situations. Those who have high level of debt, their situation would be more under pressure. And for those we recommend they continue the adjustment in order to reduce their vulnerabilities by reducing the level of death but also broadening the the through structure reforms their capacity to build growth. And you have a group of countries in real challenges, low income countries and countries in conflict. Sudan is one of the countries that are in a very dire situation. Yemen also those are in a conflict situation and they need to have more support and assistance to avoid, I would say, dramatic humanitarian cases. All parts of the world are trying to pivot towards industries of the future. How is the Middle East region doing in that context to provide resilience for the future? Well, here we see very good news coming because both on AI and on environment a lot of investment has been made. The size of the renewable sector is growing led by some of the key economies like UAE like Saudi with a large set of investments in those in those new new sectors. We see also technology gaining momentum in in in many of the markets, the integration in the value chains where the near shoring is also providing opportunities to those. Last but not least, we see now an attempt or a strategy to grow partnerships. We see partnership in with Asia, China and and other Asian countries partnering with Africa, but also with Central Asia and Caucuses. Those recent developments are done in a way to allow the region to become a more connector that in fragmented world would help the region to build bridges but also to grow faster. Let me just focus the lens more on trade. Because of this stage the concerns about escalation in the Middle East conflict does bring potential implications to trade. What would a worst case scenario look like in terms of trade for the Middle East? Well, we are seeing a decline in trade through the Red Sea and Suez Canal, 1/3 of the container trade is go through this. And also almost 15% of the global trade is channelled through the Red Sea. We saw a drop, a large drop in trade in trade volumes. An increase in the cost of trade insurance is also cost of transportation and rerouting. We have new channels, multi modal channels. For example, the Saudi is trying to redirect some of its flows. We have also the middle corridor from China to Europe going through some of the South and Central Asian countries. Therefore, the whole trade is now being reshaped, reshaped by the risks, reshaped also by the policies and the tension that exists globally. The region is trying to adjust to that, reduce the negative impact, but also to try to find its place in this new order of global trade.