Ongoing international trade turmoil could trigger a negative effect on the small and medium-sized industries in the Middle East, hindering their abilities to scale and expand internationally, according to a top official in the International Trade Centre.

“Many SMEs remain at home and they are not competitive and they are not competitive because they remain at home,” Arancha Gonzalez, executive director of the Switzerland-based International Trade Centre said in a response to a question by Zawya during a panel discussion on trade tariffs during the World Economic Forum’s Global Future Councils event in Dubai on Monday. The International Trade Centre is a joint agency of the World Trade Organization and the United Nations.

The United States has issued several new trade tariffs this year against major exporting countries, such as China. American moves to impose tariffs has led to counter actions taken by China and other countries and ignited the prospect of a trade war that has already sparked a sell-off in some equities markets as investor sentiment has turned negative due to fears over the impact it could have on the world’s economy.

SMEs are seen as a key pillar for economic growth in Arab countries that mostly suffer from high unemployment rates among citizens.

The number of both formal and informal MSMEs- a classification that includes micro-businesses and SMEs - is estimated at 19-23 million entities, constituting 80 to 90 percent of businesses in Arab states across the MENA region, according to a report issued by the International Finance Cooperation in 2017.

“Trade for SMEs means competitiveness. Competitiveness means productivity. Productivity means better jobs and better working conditions. This is why trade matters for the SMEs and this is why (trade) turbulence is bad for SMEs, especially today,” Gonzalez said.

Jihad Azour, the IMF’s director for the Middle East and Central Asia, told reporters during a press conference in Dubai on Tuesday that trade tensions could have an indirect negative impact on the economic growth of the region.

“If trade tensions reduce growth in the region’s key economic partners such as China, Euro area, export demand and foreign direct investment in the region could decline,” Azour said during a media briefing discussing the IMF’s economic outlook for the Middle East and Central Asia.

“Additionally, (a) global economic slowdown could also result in lower commodity prices that could affect several countries in the region. Another concern is the potential of sharp deterioration of emerging market sentiment, which would add to the region’s financial challenges, especially for vulnerable oil-importing countries,” he added.

The economies of the Gulf Cooperation Council (GCC) rely on oil as a main source of revenue. Saudi Arabia, the GCC’s biggest economy and its most populous nation, is the world’s top exporter of oil.

(Reporting by Yasmine Saleh; Editing by Michael Fahy)

(yasmine.saleh@refinitiv.com)

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