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Overview

  • More than a year into the COVID-19 pandemic, much of the Middle East and North Africa (MENA) is trapped in the grip of uncertainty. The combined regional and global effects of the pandemic threaten to push 192 million people in MENA into extreme poverty – up from 176 million. And yet the policy response—designed to lessen the impact of the pandemic on citizens—of many MENA governments has been unprecedented, involving in some place social transfers rapidly paid out. To support their labor markets, several governments have offered workers paid leave or subsidized wages to alleviate their distress. A few countries have even used the pandemic as a catalyst for reform: Morocco, for example, has launched initiatives to strengthen social resilience long-term.

    But at the same, in parts of a region that stretches all the way from the Atlantic through the Mediterranean to the Gulf, political instability, fragility, and conflict are compounding the challenges governments face as they try to maintain public services and mitigate the impact of the pandemic with whatever resources they have access to. In Lebanon, political stand-off and the collapse of the financial system have had a severe impact on people’s livelihoods and the country’s economy. In Yemen and Syria, armed conflict—coupled with declining remittances and reduced humanitarian assistance—are plunging the countries deeper into crisis.

    Vaccination drives, pre-requisite to exiting the crisis, are moving across the region unequally, due to constraints on vaccine supply. Many countries have signed bilateral agreements with manufacturers but in most cases their allocations cover less than 10% of their populations.

    Meanwhile, disruption in core health services, drops in household income, school closures, and persistent unemployment are likely to precipitate heavy economic and social costs for the MENA region.

    Growth Outlook

    After a sharp contraction in Gross Domestic Product (GDP), a recovery of sorts is forecast for MENA in 2021, but that recovery is, in part, dependent on an equitable rollout of vaccine. And with GDP losses by the end of this year expected to amount to US$227 billion, it is unlikely any economic recovery will be strong enough to get the region’s output back to pre-pandemic levels.

    The substantial borrowing that MENA governments have had to incur to finance emergency expenditure on essential health and social protection measures has increased government debt dramatically. The average public debt in MENA countries has risen almost 8 percentage points, from about 46% of GDP in 2019 to 54% in 2021. Debt among MENA oil importers is expected to average about 93% of GDP in 2021. And the need to keep spending—and keep borrowing—will remain strong for the immediate future.

    The pandemic and the associated collapse of oil prices has severely hit MENA’s oil exporters. The benchmark price in Brent oil fell from about US$65 per barrel before the pandemic to close to US$20 per barrel in April 2020. Revenue from oil exports, the main source of income for many oil producers in the region, was expected to contract by 38% in 2020.

    On average, the region’s real GDP per capita is forecast to increase by a meagre 0.6% in 2021—all in all, real GDP per capita in MENA in 2021 could be 4.7% below its level in 2019. Heavy GDP losses are observed across all MENA country groups. The GDP level in 2021 for developing oil importers was forecast to be 9.3% below the counterfactual GDP level without the pandemic. The counterfactual decline for Gulf Cooperation Countries is 7.7%, and for developing oil exporters, 4.4%.

    Most government revenues dropped by 24% in 2020. Exports from the region fell sharply at the start of the pandemic and have only partially recovered since. After dropping 44% year-on-year in the second quarter of 2020, exports of goods continued year-on-year declines of 17% in the third quarter and 10% in the fourth.

    In the short-term, fiscal spending is needed to mitigate the effects of the pandemic. On top of this, boosting economic growth in MENA requires deep structural reforms, greater transparency, and improved governance to raise productivity and generate jobs. However, the level of uncertainty in relation to the pandemic, and to political instability in some MENA countries, will likely hinder a solid economic recovery for the region in the near future.

     

    Last Updated: Jul 01, 2021

  • To emerge stronger from this crisis, MENA countries must pursue a two-pronged approach: respond to the immediate health, social, and economic imperatives of COVID-19 and, at the same time, adopt structural reforms that help restore public trust, strengthen human capital, support jobs and economic transformation, advance gender equity, address fragility, and enable green growth.

    To support them, the World Bank Group is continuing its lending and knowledge programs. Its strategy, in place since October 2015 but expanded since, rests on four pillars:

    i) Renewing the Social Contract

    ii) Expanding regional cooperation

    iii) Strengthening resilience to climate and refugee shocks

    iii) Promoting recovery and reconstruction in conflict-affected countries.

    The Bank’s priorities going forward will be to work to restore public trust in governments by supporting governmental policy reforms that strengthen governance and transparency, improve the quality and inclusivity of services, and create economic opportunities that also remove barriers to women’s participation in the economy. The Bank is also focused on strengthening human capital by modernizing education, health, and social protection systems in the region.

    The Bank is supporting job creation by strengthening policies to allow more competition and create space for the private sector, and by supporting digital transformation and facilitating regional cooperation in areas like the integration of energy, trade, and infrastructure. And the Bank is working to advance gender equality by focusing on this issue in all its operations, deepening direct country engagement on this through programs like the Mashreq Gender Facility, and embedding gender analysis in country and regional diagnostics.

    It has been working to mitigate the risk of conflict and help MENA countries spur a green recovery by addressing environmental fragility and enabling green growth as one aspect of this: in this context, it is finalizing its MENA FCV Action Plan and new Climate Action Plan. A focus of the Climate Action Plan is to support the National Determined Contributions of MENA countries. The Bank is planning to launch diagnostic tools for climate and development data in several countries, starting with Egypt, Jordan and Morocco.

    In the Spring of 2021, the Bank detailed the ways in which it is putting this strategy in place, through lending and advice to governments. Highlights include:

    • Restoring trust: Transparency, tech-enabled service delivery, and debt management
    • Strengthening human capital: Modern education, health, and social protection systems
    • Supporting jobs and transformation: Competitive private sector, digitalization, and regional integration
    • Advancing gender equity: Inclusive economies with fewer barriers to women’s involvement
    • Addressing fragility: Recovery and reconstruction, and support for refugees and host communities; and
    • Enabling green growth: Combatting climate change; resilient inclusive, and sustainable growth.

    Its new Climate Action Plan (2021–2025) identifies areas of transformation to step-up climate action in MENA:

    Food systems, natural capital, and water security

    • Energy transition and low-carbon mobility
    • Climate-smart cities and resilient coastal infrastructure, and
    • Sustainable finance and whole of government approach.

    Last Updated: Jul 01, 2021

  • The World Bank has a portfolio totaling about US$21 billion in the MENA region, covering a diverse range of sectors, such as agriculture, energy, education, the environment, health, social protection, trade, and transportation. Over 90% of programs completed in recent years have been assessed by the Bank’s Independent Evaluation Group as having achieved their objectives.

    In the fiscal year that ended on June 30, 2020, new financial commitments to MENA included 26 projects worth a total of US$3.6 billion—US$3.4 billion from the International Bank for Reconstruction and Development (IBRD) and US$202.9 million from the International Development Association (IDA). There were US$103 million in new committed grants for the West Bank and Gaza.

    The Bank has delivered 140 advisory services and analytical products; its revenue from agreements for its Reimbursable Advisory Services reached US$65 million. Its expanded advisory program continues to support socio-economic reforms in Gulf Cooperation Council countries.

    COVID-19 Response

    When COVID-19 spread through MENA, Bank support surged to help countries blunt the impact of its damage to national health services and their economies. This included providing financing, policy advice, and technical assistance to help countries cope with the urgent health needs brought on by COVID and to support safety net systems, including cash transfer programs.

    The over US$2.5 billion the Bank has made in new commitments for COVID-19 in MENA since May 2020 is helping some countries in the region save lives, protect the most vulnerable, support sustainable business growth and job creation, and strengthen institutions to rebuild. It has also funneled over US$500 million from existing Bank projects into emergency health.

    In February 2021, the World Bank issued its first financing for COVID-19 vaccinations: US$34 million from the Lebanon Health Resilience Project was reallocated for vaccine procurement for citizens and refugees in Lebanon. Since then, additional financing has been committed for vaccine projects in Tunisia, Jordan, and Yemen, with other vaccine procurement projects are under preparation.

    Last Updated: Jul 01, 2021

  • In recent years, the World Bank has worked to build stronger partnerships with other development organizations to put its strategy in the MENA region into action. These partnerships are built on collaborative approaches in areas like joint analytical work, the co-financing of projects, Bank-managed financial platforms, and caroling collective action in support of policy reforms in cooperation with recipient countries. Today, the Bank’s partnerships remain strong with bilateral donors, multilateral donors, and regional development banks, including Arab institutions, and with emerging donor countries.

    The MENA region has embarked on reforms to its Trust Fund (TF) portfolio, as part of the World Bank’s reform process to transition to fewer large trust fund programs. These larger trust fund programs – known as umbrella trust funds – will provide greater efficiency and defragmentation of multiple standalone programs to help support the priorities underpinned by the regional strategy. The MENA region has five approved such umbrella trust funds – including one regional and four country-level programs (Lebanon, Tunisia, Yemen, and West Bank & Gaza). The World Bank also has 16 standalone TFs, including the West Bank and Gaza TF.

    The Bank’s well-established cooperation with the G7 continues, as it does with the European Commission and countries in Europe in general. Close partnerships with UN agencies have been instrumental to enabling the Bank to support conflict-affected countries, such as Yemen, allowing it to fund programs where humanitarian and development assistance intersect.

    Lastly, outreach efforts have been especially strong with non-traditional partners. The World Bank maintains regular dialogue and partnership with Multilateral Development Banks and bilateral donors, including the Gulf Cooperation Council and the Arab Fund for Economic and Social Development. The Bank is also leading coordination with the Arab Coordination Group, bringing together 12 regional finance institutions including the Saudi Fund, the Kuwait Fund, the Abu Dhabi Fund, and the Qatari Fund. Finally, the Bank has been working to strengthen its engagement with parliamentarians, civil society organizations, think tanks and academia, and members of the private sector.

    Last Updated: Jul 01, 2021

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