Introduction

Introduction

The COVID-19 crisis is the fourth crisis to hit the Middle East and North Africa in the past decade, following the Arab uprisings, the 2014–16 decline in oil prices, and the 2019 resurgence of protests in countries that had escaped the first wave of protests in 2010–11 (Muasher and Yahya 2020). This crisis differs from the others because of its overall socioeconomic impact and its distributional consequences. Already, it has exacerbated a series of problems that characterized the region before the crisis—high shares of inactivity, especially among youth; inequality in education; high levels of informality; and large gaps in economic opportunities for women. In 2020, during the pandemic, about 80 percent of informal private sector employees and 68 percent of self-employed reported reduced work in many MENA countries, according to World Bank phone surveys.

The incidence and spread of the pandemic have inevitably affected the socioeconomic conditions in the region, derailing progress and intensifying economic woes. Increasingly, the evidence shows that the negative effects of COVID-19 are being disproportionally borne by those who, prepandemic, were already disadvantaged and vulnerable (Hill and Narayan 2020; Oxfam 2021). Using April 2020 growth forecasts from the World Economic Forum, Lakner et al. (2020) estimated that an additional 4 million people are expected to fall into extreme poverty in MENA as a result of the pandemic. The June 2020 Global Economic Prospects (GEP) forecasts raised this estimate to 5 million, and the January 2021 GEP forecasts further raised this estimate to 7–8 million.

Especially worrisome is that it will take many years before the region’s economic activity springs back to pre-COVID-19 levels. Per capita GDP in MENA, which was estimated to be about US$14,000 before lockdown, dropped to just a little above US$13,000 during 2020 and is expected to take the next four or five years (by 2025) to bounce back to US$14,000. Meanwhile, the economic cost of COVID-19 in MENA is estimated at about US$227 billion. Further, infection rates have intensified, exerting greater pressure on health care, and fiscal support packages across MENA averaged 2.7 percent of GDP, adding to fiscal pressure.

At the global level, mortality from the pandemic stands as high as 2.6 million as of March 2021 (Schellekens and Wadhwa 2021). COVID-19 induced extreme poverty—the difference between poverty rates with the pandemic and without the pandemic—and is estimated to rise by about 88–115 million people compared with prepandemic levels. And lockdowns and mobility restrictions have accelerated economic

recession and led to steep downgrades in growth projections. In 2020, worldwide economic output is estimated to have contracted by about 4.4 percent (IMF 2020). And economic projections confirm that extreme poverty will increase across the globe as a result of COVID-19 impacts, rising to as many as 150 million people by 2021, and upend the global trend toward less poverty.

Toward the end of 2020, David Malpass, president of the World Bank Group, stated in the foreword to Poverty and Shared Prosperity 2020: Reversals of Fortune that the pandemic is expected to cause more than 1.4 percent of the population to fall into extreme poverty, which will set back poverty reduction efforts by three years. As the report noted, COVID-19 increased poverty by 8.1 percent in 2020, compared with 2019. Furthermore, the poverty rate is expected to increase by about 1.4 to 1.9 percentage points (baseline scenario to downside scenario) in 2021 (Lakner 2020). However, this seems to be an underestimation for the MENA region, where estimates suggest a much higher increase in poverty (for example, 7.3–11.9 percentage points in Tunisia, 20 percentage points in the Islamic Republic of Iran, 13 percentage points for host communities in Lebanon, and 39 percentage points for refugees in Lebanon).

For MENA, a big part of the recovery problem is that even before the pandemic hit, countries in the region had been struggling with many structural issues, as evident in MENA’s annual GDP growth rate of 1.4 percent over the past two decades—a level that was low relative to other regions. It has faced low employment, especially among its young population (close to 30 percent unemployed); its role in global value chains has been limited to low value added goods (and heavy dependence on oil exports); and its large public sector and bureaucracy have failed to provide a conducive business environment. Even food insecurity has been on the rise; in 2019, more than 30 percent of the global total of food insecure people (43 million of the 135 million) were in MENA.

Complicating matters is the fact that each country faces varying degrees of threats as well as reform challenges, necessitating tailor-made policies. In part, this variation reflects the fact that the region is a mix of high-income countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates); upper-middle-income countries (the Islamic Republic of Iran, Iraq, Jordan, Lebanon, and Libya); some lowermiddle-income countries and economies (Algeria, the Arab Republic of Egypt, Morocco, Tunisia, and the West Bank and Gaza); and some lowincome countries (the Syrian Arab Republic and the Republic of Yemen). In addition, although some have a heavy dependence on oil exports (Algeria, Gulf Cooperation Council countries, and the Islamic Republic of Iran), others have either a preexisting financial crisis (the Islamic