MENA GDP to crash 5.7% this year -UN
It’s not looking pretty for MENA economies if this UN report is anything to go by: MENA economies are expected to contract by a collective 5.7% this year because of the covid-19 pandemic, according to a UN report (pdf) released on Thursday. This would represent an overall loss of USD 152 bn and result in another 14.3 mn people entering poverty. The region’s major stock markets have seen average losses of 23%, and by the end of the year it is set to see a loss of USD 35 bn in exports, excluding oil revenue, and to import some USD 111 bn less in consumer goods, equipment and raw material than before the pandemic.
Foreign direct investment will likely fall by up to 45% this year, constituting a loss of some USD 17.8 bn, the UN Economic and Social Commission for Western Asia predicts. The electrical and transport sectors — the most integrated global value chains in the region — will be hardest hit.
Economic shocks are impeding the provision of recovery packages: Cratering oil demand, rising debt and falling revenues from tourism, remittances and trade all impact the ability of MENA economies to provide adequate recovery packages and weather the economic and social fallout from the crisis, the report says. Cumulative fiscal stimulus across the region is USD 102 bn, some 4% of regional GDP — significantly lower than the global average of 11%.
And so are “unsustainable” levels of debt. While the fiscal space needs to grow to offset covid-19’s medium to long-term impact, states will see revenue fall by almost USD 20 bn due to lost indirect taxes, the report says. At the same time, fiscal deficits are expected to spiral to more than 10% of GDP, up from 2018’s average of 2.9%, as governments ratchet up borrowing. The debt-to-GDP ratio is expected to increase for most countries, resulting in “unsustainable” levels of debt that will both hinder efforts to mitigate the pandemic’s impact and stall progress on the Sustainable Development Goals, the report states.