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Regional Market Analysis: Economic Trends across RBC Region, Mid-Year 2020 Update (Issue #7 July 2020)

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The aim of the report is to give a general overview about the market situation of 16 countries in the region in the simplest way possible. The Market Status indicator shows the overall level of market challenges in the country, which is classified based on annual consumer inflation or food inflation rates as follows:
To better understand the market situation and the possible reasons for price trend developments, this report is complemented by a description of a different range of economic indicators.

Regional Overview as of June 2020

In the first half of 2020, the COVID-19 pandemic resulted into massive economic turmoil as most countries in the region have been affected by simultaneous shocks, including a drop in domestic and external demand, a drop in oil prices, a reduction in trade, the disruption of production, a fall in consumer and investor confidence as well as tightening of financial conditions.

Considering the compound effect of strong containment measures, the disruption in global supply chains and the structural characteristics of individual economies, growth has been estimated to significantly slow down for the current year. Public debt and government deficits are also expected to widen. In addition, the costs of living have increased, while the purchasing power of households has deteriorated across many countries of the region.

As of June 2020, general price level in the region saw an increase compared to 2019, mainly in Lebanon,
Sudan and Syria (“crisis” level according to the Market Status indicator). The increase observed in these countries was mainly due to food price spikes, as the cost of the food basket in these countries more than doubled compared to June 2019. In addition, the three countries saw a sharp depreciation of their currency against the USD, mainly due to domestic socio-political developments. “Alert” levels were observed in Iran, whose level of headline inflation saw a y-o-y increase by 22.5 percent, while food inflation reached 14.9 percent in the same reference period. “Stress” levels have been recorded in most countries of the region, mainly when considering annual food inflation (up 19.3 percent in Yemen, up 16.5 percent in Tajikistan, up 12.9 percent in Turkey and up 10.7 percent in Kyrgyz Republic).

Countries whose economies are poorly diversified and heavily dependent on the hydrocarbon sector (such as Algeria, Iraq, Iran and Libya) saw their economies to suffer due to the decline in global demand for oil since February 2020, which led to a sharp decline in the price of hydrocarbon products, hence in government revenues.

Measures to curb the COVID-19 contagion have also had an impact on unemployment, whose rate has increased in many countries of the region (Armenia, Egypt, Iran, Jordan, Lebanon, State of Palestine, Tunisia, Turkey).