Pakistan, other remittance-dependent states: Up to 1.3m more people may be living in extreme poverty: IMF

ISLAMABAD: Fragile and conflict-affected states like Yemen and Sudan and other remittance-dependent countries, such as Egypt, Pakistan, and Uzbekistan, could collectively see up to 1.3 million more people living in extreme poverty in 2020, says the International Monetary Fund (IMF).

The Fund in blog, "How the Middle East and Central Asia Can Limit Economic Scarring in the Wake of COVID-19," on its website, stated that given the unprecedented nature of the current challenges and the already elevated fiscal and external vulnerabilities before the pandemic hit, countries in the Middle East and Central Asia face the daunting possibility that the impact of this crisis will linger for even longer than the global financial crisis.

"Our economic outlook estimates that, five years from now, countries in the region could be 12 percent below the GDP level suggested by pre-crisis trends - compared with 9 percent for emerging markets and developing economies. What's more, a return to the pre-crisis trend could take more than a decade," it added.

Scarring in the region could occur in a few key areas.

First, continued containment measures expose services, especially travel and tourism, to severe disruptions and losses.

In fact, for tourism-reliant countries - such as Georgia, Jordan, Lebanon, and Morocco -we project that baseline GDP and employment growth could go down by five percentage points each in 2020, with lingering effects for as many as five years.

Second, with higher leverage and lower profitability, corporates in the region entered the crisis in a weaker position than in past crises.

Data from the first half of 2020 shows corporate revenues dipped by seven percent, and many sectors, such as energy, manufacturing, and services, had double-digit drops.

The damage to corporates in the region will likely take years to undo, raising the risks of corporate default in the medium term.

Third, remittances are estimated to have contracted by 23 percent on average during the first half of 2020.

Persistently lower remittances will soften private demand and worsen poverty and inequality.

Fragile and conflict-affected states, such as Yemen and Sudan, and other remittance-dependent countries, such as Egypt, Pakistan, and Uzbekistan, could collectively see up to 1.3 million more people living in extreme poverty in 2020, it added.

Copyright Business Recorder, 2020