Transcript of the Press Conference on the Regional Economic Outlook Update for the Middle East and Central Asia
July 13, 2020
MS. AMR: Thank you, Jihad. We go to John's second question and it's more on the MENA region. How are the larger countries of the MENA region able to financially contend with a second wave, such as Iran and Iraq? You already spoke about Egypt.
MR. AZOUR: Well, the situation is different between oil exporters and oil importer countries. Egypt is an oil importing one, and Iran and Iraq are oil exporting ones. Iran’s economy has been suffering over the last few years because of the impact of the sanctions, and also Iran was one of the first countries to be affected in the region by the COVID-19. And the outbreak was massive and lead to very stringent measures by the authorities in parallel to additional stimulus measures that the government put forward.
Of course, the drop in oil price did not help and Iran will face, for the third year, negative growth, and background of high level of inflation. Therefore, in Iran it's very important to address healthcare issues first by keep investing and expanding the support to provide additional health capacity and social protection and the government has introduced a fiscal stimulus package of 6 percent of GDP. This is a step in the right direction. But it's also important to address the issue of exchange rate that has been falling, and multiple exchange rate, and inflation. And the step forward is to unify exchange rate, address some of the fiscal issues, and financial issues that needs to be reformed in the system and gradually allow the Iranian economy to regain its level of production.
The Iranian economy is more diversified than others, and the size of the oil sector is smaller, which is not the case, for example, for Iraq. Iraq, the oil sector is very important. More than 90 percent of revenues, of government revenues in Iraq come from oil. The size of non-oil sector remains very small.
In the case of Iraq the outbreak of the coronavirus has had an impact, and the authorities recently increased the level of measures to rein in and control the spreading of the virus.
For Iraq, it's very important also to move on three steps.
Step number one is protect lives for their citizens, especially in Iraq we still have an important number of internally displaced and vulnerable groups. It's very important to address the issues of those.
The second important pillar is to stabilize the economy, especially that the level of erosion in public finance has been rapid over the last few years.
And three, for a country that is dependent on oil, but yet has a lot of other potentials to offer, is to work on increasing those. For example, agriculture, industry, are sectors that can provide Iraq with capacity to increase the size of the economy but also to create jobs.
It's very important for Iraq to be careful of how to address the public finance situation, and the financing of the Treasury for the next couple of years.