IMF: Mideast conflicts have erased economic gains of a generation

As a region that has been gripped by more conflict than any other for more than half a century, the Middle East today faces unprecedented challenges, the International Monetary Fund said Friday in a new report.

Unrest in countries such as Iraq, Libya, Syria, and Yemen has erased "development gains for a whole generation," causing deep recessions, high inflation, and damaged institutions. This is not to mention the loss of life, the emigration of skilled workers, and damage to physical infrastructure.

To quantify the economic costs of conflict, the IMF analyzed the economies of 179 countries since 1970, and released its findings on Friday, ahead of a high-level UN summit next week on refugees and migrants.

Syria’s output, for example, now is estimated to be less than half that of its pre-conflict levels in 2010. Inflation had surged by almost 300 percent there as of May 2015, reports the IMF. Yemen’s GDP declined by up to 35 percent last year alone. Libya's fell nearly the same in 2014, in part because of a steep decline in oil prices.

“We estimate that even with a relatively high annual growth rate of 4.5 percent, it would take Syria more than 20 years just to rebound to its 2010 pre-conflict GDP level,” writes Christine Lagarde, the managing director of the IMF, in a blog post.

To help rebuild the region, the IMF warns, the world will need to scale up development aid in the form of grants and concessional loans. The $11 billion that has already been pledged by countries for Syria and the region through 2020 "would not be enough given the magnitude of the crisis," wrote Ms. Lagarde.

The IMF reports that 20 million people are displaced, and 10 million more are refugees – “a scale not seen since the end of World War II.”

“The immense humanitarian costs that these conflicts inflict are difficult to grasp,” writes Lagarde.

The implications are not just devastating to the countries facing armed conflicts, but also to the growth of neighboring countries and to those taking in millions of refugees.

The influx of refugees from Syria and Yemen to Europe has had only a small economic impact and some positive effects, according to the IMF. That’s in large contrast to what’s happening in the Middle East and North African host countries.

Migrants competing for informal employment in Lebanon, for example, have pushed down wages and put more strain on already tight public services there, such as health care and education. Though half of Syrian refugee children have been able to enter Lebanon's public education system, they've expanded classroom sizes, which, “combined with inadequate teacher training – has reduced overall education quality,” the IMF says.

This report includes material from Reuters and the Associated Press.