Arab region incurred $140 bln in economic losses due to coronavirus pandemic: ESCWA

Doaa A.Moneim , Tuesday 29 Dec 2020

The UN Commission for Western Asia said that despite such losses the region faces two likely economic scenarios for 2021 amid the second wave of the COVID-19 outbreak, both involving positive economic growth

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Egypt’s recovery in 2021 will be fuelled by the revival of the tourism sector following the pandemic. (file folder) Reuters

The Arab region incurred about $140 billion in losses that has caused an estimated 3 percent decline in its growth in 2020 because of the COVID-19 crisis, announced the United Nations Economic and Social Commission for Western Asia (ESCWA).

In its 2019-2020 issue of the annual 'Survey of Economic and Social Developments in the Arab Region' report, released on Tuesday, ESCWA said that despite such losses the region faces two likely economic scenarios for 2021 amid the second wave of the COVID-19 outbreak, both involving, more or less, positive economic growth.

According to the report, the two scenarios include an optimistic one, projecting the region to attain a growth rate of 3.5 percent, while the other is less optimistic, limiting growth prospects to 2.8 percent.

According to the report, middle-income Arab countries are expected to achieve the region’s highest growth rates, reaching 5 percent in the optimistic scenario and 4.1 percent in the less optimistic one.

It added that the actual path will depend on the ability of Arab countries to deal with the COVID-19 pandemic.

For Egypt, the report estimated the country to have contracted by at least 1.1 percent in 2020 before recovering by a projected 6.1 per cent in 2021 (a contraction of 2.1 percent in 2020 followed by 7.5 per cent growth in 2021 in the pessimistic scenario).

This comes after a good performance in 2019, when the economy grew by 5.9 percent driven mainly by tourism, gas extractives, wholesale and retail trade, real estate, and construction. Prior to the pandemic, the Egyptian economy was expected to grow by 5.7 percent in 2020, and 5 percent in 2021, the report expounded.

It also added that Egypt’s recovery in 2021 will be fuelled by the revival of the tourism sector following the pandemic.

However, the report warns that although growth is expected to be positive in both scenarios, it will not be enough to yield decent job opportunities.

In this regard, the report revealed that the region’s unemployment rate is expected to rise to 12.5 percent in 2021, projecting it to reach its regional high in Palestine (31 percent) and Libya (22 percent); while it is expected to exceed 21 percent in Jordan and Tunisia, and hover around 5.8 percent in Gulf Cooperation Council (GCC) countries.

On the other hand, the report expected the region’s exports to bounce back in 2021 by increasing to 10.4 percent, after having decreased by 50 percent in 2020.

Addressing debt crisis in the region, the report disclosed that it has doubled in the past decade to reach about $1.2 trillion in Arab countries not affected by conflict, and about 80 percent of Arab middle-income countries GDP, driven by the region’s expanding in borrowing to finance government expenditure, which has a negative impact on productivity and growth.

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Also according to the report, the situation points to weak governance, challenging states to identify “how” rather than “how much” to spend.

If the current debt situation persists, it will bring about a crisis that can only deepen the current socioeconomic crisis, especially in middle-income countries that will not benefit from the G20 Debt Service Suspension Initiative (DSSI) targeting low-income countries, which have been able to save about $294 million thanks to DSSI, also mentioned in the report.

“The crisis faced by the Arab region goes beyond the economic realm to encompass major social challenges. The region is also suffering from rising poverty, with an average rate that might reach 32 percent in 2021, affecting 116 million people. It is grappling with rising youth unemployment, with an average rate that might reach 27 percent; and with persisting gender inequality as it registers the world’s highest gender gap of 40 percent,” said the report’s lead author Mohamed Hedi Bchir, from ESCWA.

Bchir also underlined that the challenges facing the region require extensive efforts from Arab governments to provide the necessary social safety nets, especially in communities hosting refugees and migrants where there is growing fear of further deterioration in living conditions due to the economic recession afflicting donor countries. 

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