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Overview

  • Over the last three decades, Middle East and North Africa (MENA) countries have witnessed the slow unraveling of the old social contract, where a dominant public sector offered jobs, social services, and security—but at the same time protected a privileged business class. The brutal upheavals of a decade ago across the region sealed the end of that tired compact. 

    As part of renewing the social contract, MENA countries should give the highest priority to transparency, governance, and the rule of law as avenues to instill trust between the state and its citizens, attract private sector investment, grow the economy, and expand access to opportunities for all.

    What gives hope to the people of MENA and beyond is the dynamism of its youth and women. Two-thirds of the population is under 35-years-old. However, pre-crisis youth unemployment stood at nearly 25%—nearly half of which (40%) were women. Before the COVID-19 crisis, nearly half of MENA’s population (42%) lived on incomes below US$5.50 per day.

    In contrast to every other region in the world, life satisfaction in the MENA region was already on the decline before the COVID-19 pandemic. In 11 out of 14 MENA countries for which data is available, life satisfaction in 2019 was lower than in 2010. Low life satisfaction is arguably driven by lack of economic opportunities, high levels of unemployment (especially youth and female unemployment), and widespread economic insecurity.

    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.

    COVID-19 and Poverty

    The COVID-19 crisis has brought severe economic losses and social pain; however, the situation remains fluid, and it is difficult to offer precise estimates of the income losses and consequent increases in the number of poor people.

    Given the information available, the World Bank estimates that poverty has increased by roughly 12 million to 15 million people in 2020 alone at the middle-income poverty line of living on US$5.50 per day. And we estimate that the number could rise to upwards of 23 million by the end of 2021.

    Growth outlook

    The COVID-19 pandemic exacerbated MENA’s underlying structural issues. The combination of the pandemic and the collapse in oil prices has affected all aspects of MENA’s economies. Oil prices have recovered somewhat; however, they remain far below levels prior to the first COVID-19 outbreak in the region in February 2020.

    As of October 1, 2020, gross domestic product (GDP) in the Middle East and North Africa was expected to contract by 5.2% in 2020, which is 4.1 percentage points below the forecast in April 2020, and 7.8 percentage points worse than that of October 2019, reflecting an increasingly pessimistic outlook for the regional economy. The region is expected to recover only partially in 2021.

    The outlook for MENA’s current account and fiscal balances also has deteriorated sharply. Driven largely by lower oil export revenue, a drop in fiscal revenue, and the large increase in fiscal expenditure required to respond to the health crisis, the region’s current account and fiscal balances in 2020 are forecast at -4.8% and -10.1% percent of GDP respectively, much worse than the forecasts in October 2019. Public debt is projected to rise significantly in the next few years, from about 45% of GDP in 2019 to 58% in 2022.

    The expected costs of the COVID-19 pandemic are about 3.7 percent of the region’s 2019 GDP—roughly $100 billion. 

    Last Updated: Nov 15, 2020

  • Strategy

    World Bank assistance is guided by a MENA regional strategy that is focused on immediate and longer-term development objectives.

    Developed to promote peace and stability through economic and social inclusion in the aftermath of the 2010-11 popular uprisings, the strategy rests on four pillars:

    • Renewing the social contract;
    • Expanding Regional cooperation;
    • Strengthening Resilience to climate and refugee shocks;
    • Promoting Recovery and Reconstruction in conflict-affected countries.

    The first pillar of the World Bank’s strategy in MENA is to help renew the social contract on the foundations of the rule of law; greater citizen trust; more effective protection of the poor and vulnerable; inclusive and accountable service delivery; and a strong private sector that can create job opportunities for MENA’s youth.

    Transparency will be critical to renewing the region’s social contract. Declining data transparency in the region has resulted in losses of income per person ranging between 7 percent and 14 percent. But even more importantly, one lesson to draw from the pandemic is that transparency in public information can save lives and improve economic outcomes.

    In parallel to the focus on immediate needs, the World Bank is helping countries develop new models for sustainable and inclusive growth in a dynamic and increasingly knowledge-based global economy. In 2019, the World Bank enlarged the focus of the MENA regional strategy to include improving human capital outcomes, leveraging digital technologies, and opening-up business environments for the private sector to compete in free and fair markets.

    Harnessing the region's human capital – The region is far from using the full potential of its human capital. MENA countries' average Human Capital Index is at 49% which means that young people in the region can expect to be on average only half as productive as they could have been with full health and quality education. MENA countries have lined up to address these disparities: a number of pioneering countries are working with the Bank to develop action plans to improve their investments in building human capital. Reforms of education systems are essential. They should start in pre-primary education and address skills development with a focus on employability in the private sector.

    Leveraging technologies for a new digital economy – Creating an infrastructure for the development of a more sophisticated digital economy will be key to take advantage of the region's tech-savvy youth. This should be coupled with adaptable regulatory reforms to allow digital payments. With access to high speed internet and digital payments, many more people could use their mobile devices for economic growth and productive purposes. To support economic transformation and lay the foundations for a new digital economy, more flexible social security systems will be required.

    Developing the private sector through Mobilizing Finance for Development (MFD) – The World Bank Group’s MFD and “Cascade” approach pairs development challenges with private sector solutions. This approach, pioneered in the MENA region, continues to be implemented through coordination between the Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA), as in the case of Egypt's energy sector where Bank-supported policy reforms were able to unlock over $20 billion in private investments in renewable energy and gas. Meanwhile, MENA is expanding the approach to social sectors.

    With an expanded regional strategy, the World Bank will help the MENA region weather the current crises, move from stabilization to transformation, unlock its vast economic potential of youth and women, and ease the constraints that hamper their creative energies.

    Last Updated: Nov 15, 2020

  • The World Bank currently has a portfolio totaling approximately US$20 billion in the MENA region. The portfolio covers a diverse range of sectors such as agriculture, energy, education, the environment, health, social protection, trade and transportation. Over 90 percent of operations that have recently exited the portfolio have been assessed by IEG to have achieved their objectives.

    Guided by the enlarged MENA regional strategy, the World Bank approved 22 new operations during the financial year that ended on June 30, 2020. New commitments in the MENA region included US$3.4 billion from the International Bank for Reconstruction and Development, which supports development in middle-income countries; and US$202.9 million from the International Development Association, the Bank’s fund for the world’s poorest countries. In addition, there were US$103 million in new committed grants for the West Bank and Gaza.

    During that time, the World Bank delivered 140 advisory services and analytical products, and revenue from Reimbursable Advisory Services agreements reached US$65 million. The expanded advisory program continues to provide ongoing support to the reform process in the GCC.

    COVID-19 Response

    As the COVID-19 pandemic spread widely through MENA, the World Bank quickly surged support to help blunt severe health and economic damage. The MENA Region launched a Regional Platform to help the countries respond to the health crisis and alleviate the pain of the most vulnerable. The immediate response included financing, policy advice, and technical assistance to help countries cope with the urgent health needs of the pandemic and support safety net systems including cash transfer programs.

    To date, the World Bank has provided almost US$700 million in emergency support across MENA to help with the most urgent public health needs, along with additional lending to support macroeconomic stability and advance structural reforms underpinned by improved governance and transparency. As part of ongoing recovery efforts, the World Bank is helping individuals and households cushion the shocks of lost income through cash transfers, providing relief to small businesses, and helping countries prepare for the eventual deployment of a vaccine.

    Last Updated: Nov 15, 2020

  • In recent years, the World Bank has intensified its partnerships in support of the new World Bank Group MENA Strategy. Our partnerships are built on collaborative approaches in areas such as joint analytical work, the co-financing of projects, World Bank-managed financial platforms, and collective action in support of policy reforms in close cooperation with the recipient countries.

    Today, partnerships are stronger with bilateral and multilateral donors, regional development banks including Arab institutions, and emerging donor countries.

    The World Bank has continued its well-established cooperation with the G7 countries, other countries in Europe, and the European Commission. Close partnerships with UN agencies have been instrumental in supporting conflict-affected countries such as Yemen, allowing the World Bank to fund programs where humanitarian and development assistance intersect.

    Lastly, outreach efforts have been especially strong with non-traditional partners, including the Gulf Cooperation Council countries and the Arab Funds for development, as well as civil society organizations and the private sector actors.

    Last Updated: Nov 15, 2020

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