The fallout from the Covid-19 pandemic has been hard on the whole world, but for the Middle East and North Africa (MENA) region effects have been even more pronounced.
“The impact on our region has been compounded. Our region has pandemics of its own, comprising fragility, conflict, and people suffering from oppression, including our sisters and brothers in Palestine,” Executive Director of the International Monetary Fund (IMF) Mahmoud Mohieldin told participants at the 27th annual conference of the Economic Research Forum (ERF), a Cairo-based regional think tank.
Titled “Sustainable Development Goals and External Shocks in the MENA Region,” the conference is being held virtually this year.
In addition to major deterioration and pressure on health systems globally and locally, the pandemic has caused an unprecedented increase in the number of those suffering from acute hunger, almost doubling to reach 265 million, he said.
Ending extreme poverty had been on a declining trajectory since 1998, but that had been reversed because of the pandemic. 120 million people have been added to the increase in the number of the extremely poor, reaching roughly 750 million rather than the previous figure of 644 million before Covid-19, with significant effects on the UN Sustainable Development Goals (SDGs).
Education poverty was another area of concern, as not everyone has access to online education. The number of those suffering from education deprivation, let alone quality of education, has increased by 10 per cent.
Meanwhile, while global growth projections are optimistic, there are likely to be discrepancies. While some advanced economies have managed to spend 7.5 per cent of their GDP to support their economies, middle-income economies have only been able to spend around 2.5 per cent.
Another area of inequality between nations is the uneven vaccine roll-out around the world. While the US and Organisation of Economic Cooperation and Development (OECD) countries are doing well, the rest of the world will suffer from the lack of vaccination, according to Mohieldin.
He said that while a proposal for a temporary waiver on intellectual property rights as far as the vaccine and essential health solutions are concerned has been accepted, the process to implement that waiver could take until December. That means that emerging and developing markets may not see adequate vaccination before a couple of years.
The advanced economies need to act fast, not only for health reasons, but also because the world is dependent on supplies and inputs from developing and emerging markets. “That needs to be a priority for the G7 and G20 and the leadership of international organisations,” he stressed.
Shedding more light on the effects of the pandemic on the MENA region, Mounir Tabet, deputy executive secretary of the UN Economic and Social Commission for Western Asia (UN ESCWA), said pre-existing structural deficiencies in the region had been spotlighted by the pandemic.
“The rentier nature of most Arab economies resulted in greater vulnerability due to the unpredictability of oil prices, remittances and tourism revenues, the three main sources of revenues for the region,” Tabet said.
Moreover, he said, while the region had not fully recovered from the 2008 financial crisis, Covid-19 had caused a three per cent contraction in GDP on average and in some instances, such as Lebanon, as high as 20 per cent. The Arab region remains poorly integrated into the global economy, so even if the latter begins to recover, that might not immediately impact the region.
Inadequate social-protection systems and ill-prepared institutions in the region meant that people who had suffered from the consequences of the pandemic and economic slowdowns and work stoppages had not been compensated enough, he said.
Added to this, Tabet pointed to the large refugee and humanitarian burden of more than 55 million refugees in the region.
Poverty and inequality were two further challenges facing the region, he said. ESCWA estimates that the pandemic has added 14.3 million people to the poor, bringing the total to 115 million people, with almost a quarter of the region’s population below the poverty line.
Inequality continues to grow. The Arab region has some of the highest rates of income inequality in the world, where in some instances 10 per cent of earners account for more than 60 per cent of national income, he said. There is also inequality according to age and gender, where women and young people continue to suffer from higher unemployment, lower education, and less political participation.
Conflict and instability are other major challenges to the region. Almost half the population has been impacted directly or indirectly by political instability, meaning that the impact in these countries is deeper and recovery will be lower, particularly since such conflict has rolled back human development gains, including the SDGs, Tabet said.
This is not only the case in countries directly affected by conflict, but also in neighbouring countries suffering from spillover effects, he added.
Youth unemployment is an additional challenge facing the region, according to Tabet. It stands at around 30 per cent, or the highest youth unemployment rate in the world, he pointed out. “The content that education systems deliver remains far from transformative. Curricula are limited and rarely innovative. The teaching profession is under-valued and under paid,” he said.
The transition from school to work continues to be extended, he said, not only due to Covid-19 and the economic slowdown, but also due to the structural weaknesses of Arab economies unable to create enough decent and value-adding jobs to absorb new entrants into the job market, let alone reduce the stock of the unemployed.
“This adds to frustration, political instability, and could potentially feed extremist thinking and behaviour,” he said.
More investment in high value-added industry was needed to allow the region to benefit from the fourth industrial revolution or to effectively integrate into sustainable and future-oriented global value chains, he said.
Without such investment, the millions of the unemployed will continue to be a burden on society, a lost generation, and a threat to political stability. So far, investment in the region continues to be directed to oil and gas and the construction and real-estate sectors, however.
Tabet said that with an already high debt and debt-servicing burden and an unpredictable revenue stream for most countries, financing the recovery is going to be uncertain, but it should not be done through additional unsustainable debt.
Mohieldin pointed to the huge increase in sustainable debt issuances in the region from $30 billion in January 2020 to around $150 billion by March 2021. These are bonds and loans raised with environmental and social purposes in mind, but they are still a fraction of what is needed, he said.
He said the region has $1 trillion that could be mobilised to help achieve the SDGs, but it is currently being placed in low-risk, low-return investments. A pipeline of projects and enhancements to the business environment were needed to attract such funds, he said.
Besides these efforts, Mohieldin said there needed to be a global effort to prevent the accumulation of debt becoming a debt crisis. The Debt Service Suspension Initiative by the World Bank for low-income countries was good, but it was not enough, he said.
Digitisation was another area the region needs to work on. The MENA region is not sufficiently prepared for the coming digital era, and it must increase investment in communications infrastructure, digital literacy, e-services, including e-commerce, e-banking and fintech, and cultural online products like online museums, Tabet said.
Traditional sources of revenue like tourism are unlikely to recover quickly, so the region will need to innovate in investment and diversify revenue streams, Tabet said, optimising growth from the green, digital, and circular economy, besides the traditional sectors of agriculture, industry, services, and tourism.
*A version of this article appears in print in the 20 May, 2021 edition of Al-Ahram Weekly