GDP will grow 2.8% by end 2021
WASHINGTON, October 7, 2021 — Long-term socio-economic trends and underfunded public health systems left the Middle East and North Africa (MENA) region ill-prepared to respond to the pandemic, contributing to a tenuous and uneven recovery as the region struggles to emerge from COVID-19.
The World Bank’s latest regional economic update, titled Overconfident: How Economic and Health Fault Lines Left the Middle East and North Africa Ill-Prepared to face COVID-19, details how MENA’s health systems were stressed prior to the pandemic, as high public wage bills crowded out investments in social services such as health, a symptom the report describes as "fiscal myopia".
Overall, the estimated cumulative cost of the pandemic in terms of Gross Domestic Product (GDP) losses in the region by the end of this year will amount to almost $200 billion. These costs are calculated by comparing where the region’s GDP would have been if the pandemic had not hit. According to the report, the region’s GDP contracted by 3.8% in 2020 and is forecast to grow by 2.8% in 2021.
"The pandemic’s crippling impact on economic activity in the region is a painful reminder that economic development and public health are inextricably linked. It is also a sad reality check that MENA’s health systems which were considered relatively developed, cracked at the seams under the crisis," said Ferid Belhaj, World Bank Vice President for the Middle East and North Africa. "Going forward, there must be a stronger focus on building core public health functions and leveraging the power of health data and preventive health systems to accelerate the region’s recovery and to prepare for future public health emergencies that may arise due to future pandemics, climate-related disasters and even social conflict."
In terms of GDP per capita, which is a measure of living standards, the report forecasts a tenuous and uneven recovery across MENA in 2021. The region’s GDP per capita is forecast to grow by only 1.1% in 2021 after declining by 5.4% in 2020. By the end of 2021, the region’s GDP per capita will still be below the 2019 level by 4.3%. Thirteen out of 16 countries in the region will have lower standards of living in 2021 than their pre-COVID levels. For individual countries, the growth rate of GDP per capita in 2021 is uneven, ranging from -9.8% in Lebanon which is in a deep recession, to 4.0% in Morocco. Recovery will also depend on a rapid and equitable rollout of vaccines; particularly as new variants of the virus emerge. Additional growth risks are posed by political uncertainty in some countries and in others on how quickly tourism rebounds.
"The last two years have shown that pandemic control is essential not only to save lives but also to accelerate economic recovery, which is now tenuous and uneven across MENA. Stressed health systems and lagging vaccinations in many middle-income and low-income countries in the region are harbingers of downside risks," said Roberta Gatti, World Bank Chief Economist for the Middle East and North Africa Region.
MENA was one of the only regions in the developing world where government expenditure as a share of GDP increased during the decade prior to the pandemic, rising from 16% to 18% between 2009 and 2019. This legacy of large public sectors and high public debt crowded out investments in public
health, which in turn shifted some health costs to individuals, evidenced by disproportionately high out-of-pocket spending on medical care. Another symptom of stressed public health systems was the low share of spending on preventive health, all of which contributed to high rates of communicable and non-communicable diseases in the region when compared to peers. Moreover, the region’s young population created the statistical illusion of a healthy population, which might have made investing in preparedness for health emergencies less urgent.
The report finds that the region’s public health systems were not only ill-prepared to absorb the shock of the pandemic, but that authorities had previously painted an overly optimistic picture in self-assessments of their health systems’ preparedness. This is what the report calls "overconfidence".
Insufficient data collection and use might have significantly contributed to this overconfidence. The report argues that improvements in data transparency for public health can help countries not only address perennial healthcare needs but also prepare for future health emergencies. The current underinvestment in public health systems thus needs to be urgently addressed by prioritizing investments on core public health functions within public sector budgets, the report concludes.
Since the start of the COVID-19 pandemic, the World Bank Group has deployed over $157 billion to fight the health, economic, and social impacts of the pandemic, the fastest and largest crisis response in its history. The financing is helping more than 100 countries strengthen pandemic preparedness, protect the poor and jobs, and jump start a climate-friendly recovery. The Bank is also supporting over 50 low- and middle-income countries, more than half of which are in Africa, with the purchase and deployment of Covid-19 vaccines, and is making available $20 billion in financing for this purpose until the end of 2022.