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

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

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.