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.
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