Covid to cost Mena region $ 200 billion, World Bank says
The Covid-19 pandemic will have cost the economies of the Middle East and North Africa $ 200 billion by the end of 2021 and the strength of the recovery in the future will depend on the capacities of each individual’s health system. countries and their exposure to rising commodity prices, according to the World Bank.
“The crippling impact of the pandemic 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 that Mena’s health systems, which were considered relatively developed, collapsed under the crisis, ”said Ferid Belhaj, World Bank vice president for the Mena region, while the lender released its regional economic update on Thursday. .
“Going forward, there needs to be more emphasis on building core public health functions and harnessing the power of health data and preventive health systems to accelerate the region’s recovery and prepare for future public health emergencies that may arise from future pandemics, climate-related disasters and even social conflicts.
The estimated cumulative cost of the pandemic in terms of lost production to the region by the end of this year is nearly $ 200 billion. The bank calculated the costs by comparing where the region’s gross domestic product would have been had the pandemic not occurred. The MENA region’s GDP contracted 3.8% in 2020 and is expected to grow 2.8% in 2021, according to the bank’s estimates.
The region’s GDP per capita, a measure of standard of living, is expected to increase by 1.1% in 2021 after declining 5.4% in 2020. By the end of 2021, the region’s GDP per capita will still be 4.3% below the 2019 cent level.
Thirteen of the region’s 16 countries will have lower living standards in 2021 than their pre-Covid levels, according to the lender. The growth rate of GDP per capita in 2021 is uneven, ranging from -9.8% in Lebanon, which is going through its worst economic crisis in three decades, to 4% in Morocco. Most countries may not return to their pre-pandemic GDP per capita levels until 2022.
“The crisis has hit most of the countries in the MENA region with underfunded, unbalanced and ill-prepared health systems,” the lender said. “Many countries in the region entered 2020 with a decades-long history of chronic low growth, macroeconomic imbalances and governance challenges, including a lack of data availability and transparency. “
The bank reiterated the International Monetary Fund’s call for a fair deployment of vaccines. Countries’ economic recovery depends on their access to vaccines and the pace of vaccinations, in addition to the risks posed by political uncertainty in some countries and the speed with which tourism is rebounding.
“The past two years have shown that controlling the pandemic is essential not only to save lives, but also to accelerate the economic recovery, which is now tenuous and uneven,” said Roberta Gatti, Chief Economist of the World Bank for the Mena region. “Strained health systems and immunization delays in many middle- and low-income countries in the region are warning signs of downside risks. “
While the Gulf countries are among the states with the highest vaccination rates in the world, political uncertainty and the fragility of many oil-exporting developing countries such as Iran, Iraq, Libya and the Yemen pose additional risks to the growth of these countries, the bank said.
The region’s fiscal balances are expected to improve in 2021. GCC countries and other oil exporters will see the biggest increase due to rising oil prices, according to the bank. Oil-importing countries in the MENA region will run budget deficits of around 7.1% of GDP this year, limiting the ability of respective governments to increase spending even as the pandemic still requires substantial health and social spending.
Last week Saudi Arabia, the world’s largest oil exporter and Arab economy, said its budget deficit forecast for this year is expected to narrow to 2.7% from a previous estimate of 4 , 9% due to the rise in oil prices and the country’s recovery after the Covid-19 pandemic is accelerating. The kingdom’s budget deficit next year is expected to decline further to 1.6% of GDP.
On average, public debt as a percentage of GDP in 2021 for the MENA region is expected to decline to 53.6% from 56.3%, according to the World Bank. For oil-importing developing countries, the public debt-to-GDP ratio is expected to drop from 90.4% to 92.3% in 2021, as budget deficits remain large.
The bright side of the Covid-19 crisis, according to the lender, is that while many countries have not been able to respond adequately to the pandemic, some countries have been able to adapt and respond quickly. The data analysis that was at the heart of public health policy making should be harnessed and serve as a springboard for further reforms and capacity building after the pandemic.
Update: October 7, 2021, 2:00 p.m.