MENA economies face $116 billion hit from virus, oil slump: World Bank

Still waters: Beirut’s waterfront is almost deserted after a coronavirus lockdown. Countries in the region face multiple threats from social distancing curbs, falling export demand and a collapse in oil prices, according to the World Bank. (AP)
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Updated 10 April 2020

MENA economies face $116 billion hit from virus, oil slump: World Bank

  • Report warns of ‘uncertainty and fear’ amid calls for transparency to help region recover from twin economic shocks

DUBAI: The Middle East and North Africa (MENA) is facing a 3.7 percent contraction in gross domestic product (GDP) this year because of twin hits from the coronavirus pandemic and the collapse of demand for oil, the World Bank is forecasting.

The fall in GDP, which amounts to about $116 billion off the region’s economies, has accelerated from the 2.1 percent downturn the bank estimated just last month. In October 2019, the bank said Middle East economies would grow by 2.6 percent this year.

Ferid Belhaj, the bank’s vice president for the MENA region, said: “More than any other region, MENA is confronting two distinct but related shocks with the spread of the virus and the collapse in oil prices.”

The gloomy forecasts were contained in a new World Bank report entitled “How transparency can help MENA.”

The bank left open the option to change its forecasts again if deteriorating economic conditions warranted that.

FASTFACT

3.7 %

MENA is facing a 3.7 percent contraction in GDP this year.

“The costs of the current crisis are fluid, because it is difficult to predict how the global economy, national policies, and societies will react as the pandemic spreads,” the report said.

The bank said greater transparency, identified as a structural defect in the region, would help an economic recovery once the spread of the pandemic is halted.

“Across the region, transparency can help lead to growth with enhanced trust in government in the years and decades to come,” Belhaj said.

But the report left no doubt as to the severity of the situation in the region. “As the coronavirus pandemic sweeps across MENA, uncertainty and fear are gripping the streets. While citizens have turned to their governments to act, decades of lack of transparency has bred distrust and undermined State credibility,” it said.

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“People cannot be certain if daily reporting and updates are true. As someone aptly described the leadership response to the coronavirus: ‘When you lose people’s trust, even when you tell the truth, people won’t believe you’,” the report added.

“Since the beginning of the 21st century, growth of output per capita across MENA has been lower than what is typical for economies with the same levels of development. The authors argue that if the region had grown at the typical rate observed in the rest of the world, the region would be at least 20 percent richer than it is today,” the World Bank said.

“The lack of data and transparency in the region could be at least partly responsible for the region’s chronic low-growth syndrome. Indeed, as this report demonstrates, MENA stands out as the only region of the world to experience an absolute decline in their index of data transparency between 2005 and 2018,” it added.

“The pandemic is affecting MENA economies across four channels: The deterioration of public health; falling global demand for the region’s goods and services; declines in MENA’s domestic supply and demand because of social distancing measures; and, importantly, falling oil prices.”

Last week, the bank unveiled a $160 billion financial support package for developing countries.


EU pledges to stay green in virus recovery

Updated 29 May 2020

EU pledges to stay green in virus recovery

  • To help economies from the 27-nation bloc bounce back as quick as possible

BRUSSELS: The European Commission pledged on Thursday to stay away from fossil-fueled projects in its coronavirus recovery strategy, and to stick to its target of making Europe the first climate neutral continent by the middle of the century, but environmental groups said they were unimpressed.

To weather the deep recession triggered by the pandemic, Commission President Ursula von der Leyen has proposed a €1.85 trillion ($2 trillion) package consisting of a revised long-term budget and a recovery fund, with 25 percent of the funding set aside for climate action.

To help economies from the 27-nation bloc bounce back as quick as possible, the EU’s executive arm wants to increase a €7.5-billion ($8.25 billion) fund presented earlier this year that was part of an investment plan aiming at making the continent more environmentally friendly.

Under the commission’s new plan, which requires the approval of member states, the mechanism will be expanded to €40 billion ($44 billion) and is expected to generate another €150 billion in public and private investment. The money is designed to help coal-dependent countries weather the costs of moving away from fossil fuels.

Environmental group WWF acknowledged the commission’s efforts but expressed fears the money could go to “harmful activities such as fossil fuels or building new airports and motorways.”

“It can’t be used to move from coal to coal,” Frans Timmermans, the commission executive vice president in charge the European Green Deal, responded on Thursday. “It is unthinkable that support will be given to go from coal to coal. That is how we are going to approach the issue. That’s the only way you can ensure you actually do not harm.”

Timmermans conceded, however, that projects involving fossil fuels could sometimes be necessary, especially the use of natural gas to help move away from coal.

The commission also wants to dedicate an extra €15 billion ($16.5 billion) to an agricultural fund supporting rural areas in their transition toward a greener model.

Von der Leyen, who took office last year, has made the fight against climate change the priority of her term. Timmermans insisted that her goal to make Europe the world’s first carbon-neutral continent by 2050 remained unchanged, confirming that upgraded targets for the 2030 horizon would be presented by September.

Reacting to the executive arm’s recovery plans, Greenpeace lashed out at a project it described as “contradictory at best and damaging at worst,” accusing the commission of sticking to a growth-driven mentality detrimental to the environment.

“The plan includes several eye-catching green `options,’ including home renovation schemes, taxes on single-use plastic waste and the revenues of digital giants like Google and Facebook. But it does not solve the problem of existing support for gas, oil, coal, and industrial farming — some of the main drivers of a mounting climate and environmental emergency,” Greenpeace said.

“The plan also fails to set strict social or green conditions on access to funding for polluters like airlines or carmakers.”

Timmermans said the EU would keep investing in the development of emission-free public transportation, and promoting clean private transport through the EU budget.