The COVID-19 pandemic is having a devastating impact on already-vulnerable economies across the Middle East and North Africa (MENA) region. Growing public health challenges and knock-on effects to economic activity triggered by strict social distancing measures are compounded by a simultaneous oil price shock that is exerting pressure on the finances of oil-exporters and oil-importers alike.
These concurrent shocks are both exacerbating and being amplified by long-standing structural challenges in MENA economies, including, but not limited to, large and inefficient public sectors, uncompetitive business environments, high youth and female unemployment, and governance challenges.
The results are high levels of unemployment (especially youth and female unemployment) and widespread economic insecurity. In a region where two-thirds of the population is under 35-years-old, pre-crisis youth unemployment stood at nearly 25% – nearly half of which (40%) were women. Pre-crisis measures of economic insecurity also revealed that nearly half of MENA’s population (42%) lived on incomes below US$5.50 per day at 2011 PPP.
Moreover, conflicts in the region contributed to a doubling of extreme poverty (measured as individuals living on incomes of less than US$1.90 per day), from 2.4% in 2011 to 4.2% in 2015; in addition, broadening the poverty measure to include a more multidimensional analysis, factors such as uneven educational attainment and access to basic infrastructure contribute to a near doubling of the extreme poverty rate.
Estimates of the costs of the crises are fluid because it is difficult to predict how the global economy, national policies, and societies will react as the pandemic spreads. Consequently, estimates of the economic costs in the region can vary in a matter of days.
As of April 1, Gross domestic product (GDP) in the Middle East and North Africa was expected to contract by 1.1% in 2020, due to the dual shock of the spread of the novel coronavirus and the associated collapse in global oil prices. Growth in 2019, however, was already low at 0.3%. The region’s real GDP per capita in 2020 was expected to fall by 2.6%, continuing a decline of 1.1% in 2019. Disruptions in global economic activity reduced the demand for the region’s goods and services, notably oil and tourism.
The virus spread and social distancing measures in the region also triggered negative domestic supply and demand shocks. Output of the region’s developing-country oil exporters was expected to contract by 3.9%. Output of the Gulf Cooperation Council (GCC) was also expected to fall by 0.4%. Despite the oil price collapse, growth of the region’s oil importers was expected to be modest at 0.6%, sharply lower than the forecast of 4.4% previously published in October 2019. Conflicts in Yemen, Libya and Syria will complicate the health responses of the countries.
These changes in the growth forecasts for 2020 as of April 1 implied that the expected costs of the crisis for the whole of MENA were approximately 3.7% of the region's 2019 GDP (approximately US$116 billion).
With strong reforms on the fiscal and energy fronts, Egypt will post a growth rate of 5.5% in 2019, and there are other positive signs: Iraq’s recovery and reconstruction efforts are moving forward, although slowly, which has resulted in recent social unrest.
Jordan and Lebanon, still bearing the cost of millions of Syrian refugees, are preparing to embark on domestic economic reforms, though challenges remain.
In Tunisia, elections may have slowed the reform agenda, but they have also stimulated debate around it. Morocco remains stable, though with slow growth. Djibouti’s 7% growth rate for 2019 is the region’s fastest but has had little impact on the country’s high level of poverty.
And growth in the Gulf Cooperation Council remains around 2.0%, with reforms in many countries, most notably Saudi Arabia.
Last Updated: May 21, 2020