Key Messages

CHAPTER 1

Setting the Stage

Gladys Lopez-Acevedo, Stuti Manchanda, and Jaime Alfonso Roche Rodríguez

Key Messages

• COVID-19, the fourth crisis to hit the Middle East and North

Africa (MENA) in the past decade, is expected to have a significant socioeconomic impact on the region, along with large distributional consequences.

• Already, growth and welfare challenges have intensified: output in 2020 is estimated to have fallen by more than 5 percent in MENA, and 2021 forecasts suggest 7–8 million people will fall into extreme poverty.

• This is occurring in a region that has long been grappling with structural vulnerabilities, such as high unemployment among youth and women, inequality in education, low participation in global value chains, and a large informal sector.

• Lockdowns and workplace closures have contracted economic activity and widened inequalities by disproportionately affecting the poorest households, those who are largely employed in informal sectors, lack health insurance, and are more prone to infections as a result of cramped living conditions.

• Given that GDP per capita is unlikely to return to its pre-

COVID-19 level before 2025, policy measures for the short run and long run need to be designed through a lens of equity, inclusion, and fiscal caution.