Acknowledgments vi

Country Groupings vii

Assumptions and Conventions ix

  Middle East and Central Asia: Country Abbreviations ix

Key Messages x

1. Steering Through Uncertainty: Strengthening Resilience in Challenging Times 1

  Global Context: A Differentiated Outlook of the Global Economy 1

  Recent Regional Developments: Resilience and Divergence 1

  Outlook: Slower Normalization with Uneven Recoveries 7

  Risks: Narrowing Margins of Adjustment 11

  Policy: From Cushioning the Shock to Building Resilience 14

  The IMF Is Committed to Supporting the MENAP and CCA Regions 18

  References 27

2. Inflation Dynamics in the Middle East and Central Asia: How Policy Frameworks and Structural Characteristics Shape the Transmission of Global Supply Shocks 29

  Introduction 29

  Global Supply Shocks and Inflation: An Historical Perspective 30

  The Empirical Model and Baseline Results 31

  What Explains Diverging Inflation Pass-Through? 33

  Which Structural Features Matter Most for Inflation Pass-Through? 37

  Conclusion 37

  References 39

3. Trade Diversification in Turbulent Times: Implications for Economic Growth and Resilience in MENAP and the CCA 41

  Introduction 41

  Trade Diversification Patterns in MENAP and the CCA Region 42

  Adverse External Shocks and the Mitigating Effects of Trade Diversification 45

  Export Diversification Trade-Offs: Resilience versus Welfare 46

  Structural Policies and Export Diversification in Practice 50

  Conclusion 51

  References 52