Overview

  • The past year has seen a number of positive developments in the Middle East and North Africa (MENA) region.

    Iraq has liberated territory that was occupied by ISIS and has moved to recovery and reconstruction; major economic and social reforms have continued in countries ranging from Egypt to Saudi Arabia; Syrian refugees and host communities in Lebanon and Jordon – with support from the international community – have continued to show remarkable resilience; and Libya has seen a renewed push for solutions to its crisis.

    Moreover, growth has picked up across the region and is projected to strengthen over the next few years. And almost all MENA countries have moved to reduce or eliminate energy subsidies, identify new sources of non-oil revenues, and expand social safety nets to shield the poor from adverse effects of change.

    At the same time, there have been setbacks. Wars have been raging in Syria and Yemen, exacting a heavy toll on human lives and physical infrastructure; progress on the Middle East Peace Process remains challenging, and parts of the region risk losing a whole generation of out-of-school children to fragility, conflict and violence.

    ECONOMIC OUTLOOK

    Economic growth in MENA is projected to rebound in 2018, thanks to the positive global outlook, oil prices stabilizing at relatively higher levels, stabilization policies and reforms, and recovery and reconstruction as conflicts recede.

    Growth in MENA is expected to rebound to 3.1% in 2018, following a sharp decline to 2% in 2017 from 4.3% in 2016. The increase in growth is broad-based, and almost all countries will experience an uptick this year. On the back of a good performance by Gulf Cooperation Council countries, oil exporters could see growth reach 3% in 2018, double their rate in 2017.

    Improvement in oil importers are expected to be helped by a sharp rebound in Egypt. Stabilization policies, reforms, and a surge in foreign receipts are expected to lower fiscal and external imbalances in 2018 and beyond.

    In the short term, the outlook for MENA remains positive, and the growth rebound is expected to hold firm over the next two years, reaching 3.3% in 2019 and 3.2% in 2020.

    However, geopolitical tensions, the challenges posed by the forcible displacement of people, including refugees, and the rising level of debt in the region could cloud the positive outlook.

    Last Updated: Apr 20, 2018

  • Given the ongoing fragility and conflict in the region, the World Bank Group launched a new regional strategy for the Middle East and North Africa in October 2015. 

    Even as the outlook for growth is positive in the medium term, the strategy remains relevant as the World Bank Group focused on supporting countries in the region recover from instability and lay the foundations for inclusive growth.  

    Instead of taking conflict and violence as given and working around it, this new strategy, entitled - "Economic and Social Inclusion for Peace and Stability in the Middle East and North Africa: A New Strategy for the World Bank Group" - puts the goal of promoting peace and social stability in the MENA region at its center. 

    The strategy is built around four pillars (“the 4 R’s”) that respond to both the underlying causes of conflict and violence as well as their consequences through development interventions that foster inclusion and shared prosperity. The four pillars of the strategy are as follows:

    (i)         Renewing the social contract – to generate a new development model that is built on greater citizen trust; more effective protection of the poor and vulnerable; inclusive and accountable service delivery; and a stronger private sector that can create jobs and opportunities for MENA’s youth;

    (ii)       Regional cooperation – particularly around regional public goods and sectors such as education, water, and energy so as to foster greater trust and collaboration across MENA countries;

    (iii)     Resilience - to refugee and migration shocks by promoting the welfare of refugees, internally displaced persons (IDPs), and host communities by focusing on building trust and building their assets; and

    (iv)     Reconstruction and recovery – through a dynamic approach that brings in external partners, leverages large scale financing, and move beyond humanitarian response to longer-term development wherever and whenever conflict subsides.

    In implementing this strategy, the WBG is relying heavily on both deepening and expanding partnerships with national, regional, and global actors, especially the United Nations (UN) and the Islamic Development Bank (IsDB). 

    With respect to financing, the WBG will continue to expand its investment in the region, but in addition to our own funds, the WBG is working with the UN and IsDB on leveraging and mobilizing global resources through a new MENA Financing Initiative to meet the extraordinary financing needs of the region. Finally, our knowledge work (including our growing RAS program) will be of prime importance in informing and mobilizing the support for the strategy and will lead (rather than follow) our lending.

    RECENT LENDING AND ANALYTICAL WORK

    Demand for World Bank financing continues to expand in the region, from US$2.8 billion in FY2014 to US$5.9 billion in FY2017 with lending of US$4 billion to date in FY2018. The growing demand reflects the expanded post-2011 fragility in the region and is due to badly needed economic reforms and critical investments, including on social safety nets (Egypt, Tunisia and Morocco), reconstruction and reforms (Iraq), refugee flows (Jordan and Lebanon) and the impact of ongoing conflict (Yemen). 

    In FY17 Egypt’s US$500 million Upper Egypt Local Development supported the most vulnerable region, while the US$1 billion Fiscal Consolidation and Energy loan supported reforms in subsidies and private sector infrastructure. The latter represented a significant step toward implementing the Maximizing Finance for Development (MFD) agenda, which aims to leverage the private sector to help finance development, while optimizing the use of scarce public resources. The latter was followed by a second US$1.15 billion loan and a $500 million education loan in FY18. 

    Iraq’s US$1.4 billion Expenditure Rationalization and Energy loan supported macro stability and reforms in the energy and the private sectors. In FY18, Iraq has so far received two loans totaling US$1.1 billion for reconstruction, water utilities and two for social protection. In FY17 Yemen received 5 loans totaling US$783 million in health and nutrition as well a social protection. 

    Projects focused on refugees and host communities included a US$249 million Employment Opportunities concessional loan to Jordan and a US$36 million concessional loan for health using the Global Concessional Financing Facility (GCFF). A US$147 million education reform loan also supported both countries. In FY17 Lebanon, a US$154 million roads loan supported employment for refugees and host communities and a US$100 million education reform loan also targeted both countries.

    A number of analytical studies have been published recently by the Bank addressing key challenges as the region struggles with major political and economic transitions. 

    The WBG’s latest Middle East and North Africa Economic Monitor examines the opportunities posed by low oil prices and the shift toward renewable energy for the region to leverage new technologies and its comparative advantages to launch a new engine of growth and job creation. 

    The Toll of War: The Economic and Social Consequences of the Conflict in Syria which examines the impact of the conflict as of early 2017, and finds the biggest loss is from the disruption of economic activity. 

    Beyond Scarcity: Water Security in the Middle East and North Africa finds that the inadequate supply of water and sanitation is costing the MENA region around US$21 billion per year in economic losses and maps out measures needed to improve water management and distribution. 

    Shedding Light on Electricity Utilities in the Middle East and North Africa finds that improvements in the efficiency of electricity utilities could cover the average investment urgently needed in the region’s electricity sector, estimated at 3 percent of GDP. 

    Last Updated: Apr 20, 2018

  • The World Bank remains engaged in a wide variety of development work, including reconstruction in Iraq, while also focusing on alleviating some of the immediate challenges arising from the crisis gripping some countries of the region.

    In Yemen, the Bank has mobilized US$1.3 billion in emergency IDA grants and partnered with UN agencies to help the 75% of the population in need of assistance.

    To respond to the risk of famine, the Bank partnered with UNICEF and private agents to implement a US$200 million Emergency Cash transfer program. The program builds on Yemen’s national cash transfer system, and targets 1.5 million households (or 8 million people). 

    The delivery of cash transfers has been rolled-out nationally in all 333 districts in Yemen, has -so far- reached 1.33 million poor and vulnerable households, of which 44 percent of the direct recipients are women. More than 75 percent of the beneficiaries used the cash transfer to purchase food and medicine only.

    An Emergency Health and Nutrition project has provided drugs, medical supplies, vaccines, as well as operating costs for 1800 health facilities, supporting the delivery of basic health services to more than 10 million Yemenis in all districts of the country.

    A cash-for-work program has provided temporary work to more than 1 million Yemenis who have provided services and carried out needed repairs to infrastructure.

    In Iraq, the Bank has a number of projects to help the country move from emergency response to recovery and development. In the recently liberated zones, seven Bridges and 320 Kms of roads have been rehabilitated and are open for traffic. 

    In addition, 39 ambulances and 14 mobile clinics have been procured, and 167 pieces of special machinery and equipment for the maintenance of water, sanitation and municipal services, as well as 3,120 garbage containers for solid waste management system were procured, delivered and successfully distributed to the targeted cities, benefiting more than 0.5 million citizens. 

    In Egypt, a US$3.15 billion programmatic Development Policy Framework (DPF) delivered technical assistance and financial support over 2015 to 2017 in support of the government’s efforts to revive the economy after the 2011 downturn. The DPF supported the consolidation of the government’s public finances while enhancing social protection of the poor, and ensuring reliable and sustainable energy.

    While moving from power deficits and rolling blackouts in 2014 to energy surpluses in 2015 and 2016, The reforms paved the way for the government to Maximize Finance for Development, with integrated World Bank Group support. 

    The DPF supported policy action in electricity tariff and subsidy management, as well as introduction of a renewable energy law, while the International Finance Corporation helped design the landmark solar Feed-in-Tariff program to attract private investment in renewable energy, and led a consortium of nine international banks to invest $653 million in solar energy, with the Multilateral Investment Guarantee Agency providing $210 million in political risk insurance to enable the private investments.  

    With the reform of energy subsidies, Egypt is saving US$14 billion annually, and a large proportion of these savings have been channeled to strengthening social safety nets that are better targeted to the segment of the population most in need.  

    In Jordan, the Emergency Services and Social Resilience Project grant helped 16 municipalities, with 2 million Jordanians and close to 250,000 Syrian refugees, respond to the increased demand for services due to the large influx of refugees, including in solid waste collection, rehabilitation of basic infrastructure, roads network improvements, lighting in the streets, and easing rising community tensions. 

    The Micro, Small and Medium Enterprise Development for Inclusive Growth project has resulted in the creation of over 2,000 private sector jobs for the most disadvantaged segments of society. 

    The Second Education Reform for Knowledge Economy project has contributed to the expansion of quality kindergartens and innovative, alternative childcare all over the country. Construction of new schools and extensions raised enrolment rates in primary and secondary schools from 96.9 percent to 98.1 percent, and 60.4 percent to 76.9 percent, respectively.

    Last Updated: Apr 20, 2018

  • The World Bank Group has stepped up its partnerships with bilateral and multilateral donors, regional development banks, Islamic financial institutions and emerging country donors. Less traditional partnerships are just as crucial: one of the sharp lessons of the recent political awakening has been the urgent need to reach out more consistently and consult across a wide spectrum of society, including civil society, academics, NGOs, and the private sector.

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MENA Team
mnateam@worldbank.org
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