The World Bank says MENA growth to be ‘uneven and insufficient’ in 2022, which should not come as a surprise to anyone if considering all elements of the current conjecture. This is what the World Bank has assessed prior to coming out with this story.
MENA growth to be ‘uneven and insufficient’ in 2022, World Bank says
DUBAI, April 14 (Reuters) – Economic growth in the Middle East and North Africa (MENA) is forecast to be “uneven and insufficient” this year, as oil exporters benefit from surging prices while higher food prices hit the whole region, the World Bank said on Thursday.
The war in Ukraine is also disrupting supplies and fuelling already-high inflation, it said.
GDP in the region is forecast to rise 5.2% this year after an estimated 3.3% expansion last year and 3.1% contraction in 2020, the World Bank said in a report, noting its own and others’ forecasts had been overly optimistic in the past decade.Report ad
“Even if this high growth rate for the region as a whole materializes in this context of uncertainty, and there’s no guarantee that it will … (it) will be both insufficient and uneven across the region,” Daniel Lederman, World Bank lead economist for the MENA region, told Reuters.
High-income oil exporters in the six-nation Gulf Cooperation Council (GCC) will benefit the most, but middle-income ones like Iran, Algeria and Iraq are also set to benefit. All MENA countries, however, are net importers of food “and will suffer the consequences,” Lederman said.
The GCC is expected to notch up 5.9% growth this year, buoyed by oil prices and helped by a vaccination rate much higher than the rest of MENA as the risk of COVID-19 variants also looms.
The GCC’s GDP is estimated to have risen 3% last year after contracting 5% in 2020.
“The oil futures markets are predicting that in a few years ahead, the equilibrium price of oil will be no more than $70,” Lederman said.Report ad
“So it’s prudent to treat the current circumstances as temporary, or transitory, and do everything that is feasible to save a significant portion of this oil windfall in order to save for the future, especially in times of uncertainty.”
GDP per capita, a measure of people’s living standards, is expected to rise 4.5% in the GCC this year and is not seen surpassing pre-pandemic levels until 2023, the World Bank said.
Most MENA economies – 11 out of 17 – are not seen exceeding their pre-pandemic GDP per capita in 2022, it said.
Lederman urged greater transparency from MENA governments regarding their economic data, citing this as a factor behind previously overoptimistic forecasts.
“Published research in leading economic journals in the world indicate that overly optimistic and imprecise forecasts are associated with debt and financial vulnerabilities, higher probability of financial crises and even economic contractions in the near future,” he said.
Countries that are net importers of oil and food and which entered 2022 with high levels of debt as a ratio of GDP were most vulnerable, he said, pointing to Egypt and Lebanon as examples. He said food security was a serious risk, even in Morocco, where a drought is expected to turn it from a modest net exporter of food to an importer this year.
The region’s oil importers are seen growing by 4% this year from an estimate of 4.2% growth in 2021 and 0.8% contraction in 2020.
“There’s a lot of pain that’s being felt, particularly by the poorest and the most vulnerable families among us, and that’s because the poorest and most vulnerable families spend a larger share of their family income and budgets on food and energy,” Lederman said.
The above featured image is of An aerial view showing Iftin Camp for the internally displaced people outside Baradere town, Gedo Region, Jubaland state, Somalia, March 13, 2022. REUTERS/Feisal Omar
WASHINGTON, March 30 (Reuters) – The frequency and severity of climate-related disasters are rising faster in the Middle East and Central Asia than anywhere in the world, posing a “major threat” to growth and prosperity, IMF Managing Director Kristalina Georgieva said.
A new International Monetary Fund paper showed that climate disasters in the region injured and displaced 7 million people in an average year, causing more than 2,600 deaths and $2 billion in physical damage.
“Droughts in North Africa, Somalia and Iran. Epidemics and locust infestations in the Horn of Africa. Severe floods in the Caucasus and Central Asia. The list of disasters is quickly getting longer,” Georgieva said in remarks prepared for the World Government Summit in Dubai.
Analysis of data spanning the past century showed that temperatures in the region had risen by 1.5° C, twice the global increase of 0.7° C, and already sparse precipitation had become more erratic than in any other region, the IMF report said.
Georgieva said extreme weather events typically cut annual economic growth by 1–2 percentage points per capita.
In the Caucasus and Central Asia subregion, she said, such events had caused a permanent loss in the gross domestic product level of 5.5 percentage points.
She called on all countries to adapt their economies to climate challenges, including through adoption of a steadily rising carbon price, increased green investments and work to ensure a just transition across and within countries.
She lauded the United Arab Emirates, a major oil producer, for its pledge to invest more than $160 billion in renewable energy to achieve net-zero carbon emissions by 2050. Egypt, meanwhile, was investing in modern irrigation techniques, education and health care.
Georgieva said it was also critical to ensure climate adaptation policies were included in national economic strategies, as investments in resilient infrastructure and better flood protection could avert economic losses.
In Morocco, for instance, simulations showed that beefing up water infrastructure improved resilience to droughts and cut GDP losses by almost 60%.
She said public infrastructure investment needs could amount to 3.3% of GDP per year for individual countries in the region over the next decade, more than twice the average for emerging market economies.
Given limited resources in the aftermath of the COVID-19 pandemic, countries would need a mix of domestic policy reforms, such as replacing fuel subsidies, and international support, including from the IMF, Georgieva said.
Reporting by Andrea Shalal; editing by Richard Pullin
The top featured image of Reuters is not only for illustration but meant to draw some attention to one of the most important cause of this traumatic situation of Egypt as well as that of many countries in the MENA region. Russia-Ukraine crisis poses a serious threat to Egypt, that with an over-population still on the rise, has a limited but diminishing arable lands area. Building on farmland coupled a certain lack of control of all real estate developments bear on the lower social classes; those supposed to be at the forefront of food production.
Russia-Ukraine crisis poses a serious threat to Egypt – the world’s largest wheat importer
Russia’s invasion of Ukraine could create a global food security crisis. It is disrupting agricultural production and trade from one of the world’s major exporting regions. This threatens to drive rising food prices still higher and create scarcity, especially for regions most dependent on exports from Russia and Ukraine.
Particularly affected is the Middle East and North Africa – or MENA – region. These Arab countries consume the highest wheat per capita, about 128 kg of wheat per capita, which is twice the world average. More than half of this comes from Russia and Ukraine.
As agricultural and food security experts, we have explored the impacts of the war on the wheat market, focusing on Egypt.
Wheat is a key food item for Egypt, representing between 35% and 39% of caloric intake per person in the last few years. And wheat imports usually account for about 62% of total wheat use in the country.
Despite the government’s efforts following the global food crisis in 2007 to 2008 to diversify sources of cereal imports, the vast majority of cereal imports, between 57% and 60%, come from Russia and Ukraine.
A number of key policy actions are needed that will reduce dependence on Russia and Ukraine in the short term. This will help Egypt’s agriculture and food system to become fairer and more resilient – an absolute necessity in the context of looming threats from climate change, water scarcity and conflict.
Black Sea import disruptions
Egypt is the world’s largest importer of wheat. It imports a total of 12 to 13 million tons every year. With a population of 105 million, growing at a rate of 1.9% a year, Egypt has become increasingly dependent on imports to meet food needs.
Imports of cereal crops have been steadily increasing over the last three decades at a rate higher than that of domestic production.
Egypt’s wheat market and trade regime is largely controlled by government agencies. The General Authority for Supply Commodities, operating under the Ministry of Supply and Internal Trade, usually handles about half of the total wheat imported, while private trading companies handle the other half.
Government agencies are already feeling the impact of the war, which has led to recent cancellation of tenders due to lack of offers, in particular from Ukraine and Russia.
Still, there is no fear of shortage in the coming weeks. In early February, Egyptian MoSit Minister Aly Moselhy said that the country held sufficient inventory to cover five months of consumption. But the outlook beyond that is less clear.
With the abrupt closure of Ukraine ports and current maritime trade in the Black Sea – wheat is transported across the Black Sea – Egypt will have to find new suppliers if Ukraine is unable to export wheat this year and if sanctions against Russia impede food trade indirectly.
Such opportunities are, unfortunately for Egypt, limited.
Currently, wheat producers in South America – Argentina in particular – have larger than usual surpluses from the last harvest available to export. Overall, however, it will be difficult to expand the global wheat supply in the short run. About 95% of the wheat produced in the European Union and about 85% of that in the United States is planted in the fall, leaving those regions little room for expanding production in the near term.
In addition, wheat competes with crops such as maize, soybeans, rapeseed, and cotton, all of which are also seeing record high prices. In combination with record-high fertiliser prices (also exacerbated by the Russia-Ukraine conflict), farmers in some regions may favour less fertiliser-intensive crops, such as soybeans.
About 20% of world wheat exports come from the Southern Hemisphere (primarily Argentina and Australia) which typically ship from December through March.
In addition, Canada and Kazakhstan are large producers that harvest in the fall. Over the coming year and beyond, their exports may be able to make up much of the deficit created by the loss from Ukraine production, but at a higher cost due to longer shipping routes and increased transportation costs triggered by higher oil prices.
Rising global wheat prices hit a 10-year high at US$523 per ton on March 7. This is a serious problem for the Egyptian government’s budget and a potential threat to consumer purchasing power.
Even just before the outbreak of the Russia-Ukraine war, prices of commodities in Egypt were increasing. The war has started adding further pressure and consumers are feeling these impacts.
Some countries have already imposed export restrictions in response to rising prices. These trends, coupled with disruptions in Russia’s and Ukraine’s exports, will likely add further upward pressures on prices going forward. Even under the most optimistic assumptions, global wheat prices will remain high throughout 2022 and the trend is likely to persist through 2023, given limits on expanding production.
The Egyptian government has been spending about US$3 billion annually for wheat imports. The recent price increase could nearly double that to US$5.7 billion. This, in turn, threatens Egypt’s Baladi bread subsidy program. This program provides millions of people with 150 loaves of subsidised bread per month. About 90% of the production cost is borne by the government at an annual cost of US$3.24 billion. The program requires about 9 million tons of wheat annually about half of the total wheat consumption in Egypt and three-quarters of Egypt’s wheat imports.
In the short term, Egypt needs to diversify its food import sources.
The government is actively exploring this option, while also increasing planned procurement from domestic sources by 38% over last year’s figure. The government has just announced a new and relatively higher buying price for domestic wheat from farmers.
In addition, the government has decided to ban exports of staple foods, including wheat, for three months to limit pressure on existing reserves.
In the long term, Egypt needs to explore options for reducing the gap between domestic supply and demand. Here are some of its options.
Boosting domestic wheat production will be challenging, as Egyptian farmers are already achieving high yields, relying on high input and water use. While there are some opportunities to expand arable land, modernise farming systems and improve water management practices, the country’s principal focus should be to adapt the farming system to address imminent water shortages and climate change threats and increase resilience, rather than unsustainably expanding production.
Reducing the high consumption and waste of bread has significant potential. Egyptians on average consume about 145 kg of wheat per capita annually – double the global average.
Improve the efficiency and targeting of the Tamween food subsidy program. This provides beneficiaries with ration cards for various foods. The program absorbs a large share of imported wheat and vegetable oils. Reforming it could reduce inefficiencies in the wheat sector and the cost of running the program.
In conclusion, the Russia-Ukraine war poses a big challenge to global food security and particularly difficult obstacles for Egypt. The short-term and long-term impacts will of course depend on how the war unfolds and affects exports from Russia and Ukraine over the coming months and years. Impacts on Egypt will also depend on other countries’ responses to global price hikes and cereal shortages.
Egypt can mitigate some of these impacts with short-term actions as outlined above, but major global shocks like the Russia-Ukraine war are also reminders of the need of longer-term reforms and solutions.
In today’s world that sadly continues on through not exactly a thin patch of worldwide traumas, the Arab League’s Arab Administrative Development Organisation as reported by Gulf Daily News of March 14, 2022, has awarded its Arab Government Excellence to Bahrain. It was 5 government institutions that were rewarded for their unified work as per the vision of the country’s monarch.
Bahrain wins five excellence awards
Five Bahraini ministries and government institutions have won awards at a ceremony to honour excellence in governance in the Arab world.
The announcement was made yesterday at a virtual celebration held under the patronage of UAE Vice President, Prime Minister and Dubai Ruler Shaikh Mohammed bin Rashid Al Maktoum in Dubai.
The Arab Government Excellence Award is organised by the Arab League’s Arab Administrative Development Organisation (ARADO), in co-operation with the UAE government.
The Health Ministry won the award for Best Arab Government Project for Developing the Health Sector, the Labour and Social Development Ministry (Best Arab Government Project for Community Development for its “Khatwa” programme for home projects) and the Interior Ministry’s Customs Directorate (Best Arab Government Development Initiative award for its Governance of Economic and Customs Information to Facilitate Trade).
The Information and eGovernment Authority picked up the Best Arab Government Smart App award in recognition of its Tawasul App for the National Suggestion and Complaint system. The Youth and Sports Affairs Ministry was selected for its Elite Project which was chosen as the best Arab government project for empowering the youth.
This achievement comes within the framework of the efforts made by the Bahraini government, led by His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince, Deputy Supreme Commander and Prime Minister, to benefit from the best practices in upgrading the government’s performance to achieve the kingdom’s Economic Vision 2030.
The award aims to promote the culture of institutional excellence among government work teams in Arab countries.
It also seeks to provide positive leadership thinking to adopt the approach of excellence and innovation in a way that enhances the ability of the governments to deal with the tasks assigned to them through continuous development of the work system and its methods.
According to the International Monetary Fund (IMF), some of the emerging market economies grew in 2020 as government incentives and support were put into action. The Forum‘s article by Ragui Assaad, Caroline Krafft and Mohamed Ali Marouani confirm that the impact of Covid-19 on labour markets in MENA in 2021 was unprecedented and not really well lived in by most. Would this pace or resilience continue in 2022?
Employment is recovering but income losses persist in MENA countries in the second year of the pandemic. Two recent ERF policy briefs summarised in this column illustrate the mix of recovery and ongoing challenges for households and firms.
With the Covid-19 pandemic on the verge of its third year, Middle East and North African (MENA) economies are recovering from the slump caused by lockdowns and other economic disruptions, but households and firms are still experiencing steep income and revenue losses well into the pandemic’s second year.
In two recently published policy briefs, we examine how workers and firms have fared in the first half of 2021 in Egypt, Jordan, Morocco and Tunisia (Krafft et al, 2021, 2022).
Household and enterprise surveys during the pandemic
The analysis is based on the COVID-19 MENA Monitor Household and Enterprise Surveys conducted by ERF over the second half of 2020 and the first half of 2021 (OAMDI – Open Access Micro Data Initiative, 2021a, 2021b).
The surveys were conducted by telephone on a panel of firms and enterprises. The household surveys are the main source of information on how households, workers and microenterprises experienced the pandemic, whereas the enterprise surveys focused on the experience of small and medium enterprises (those with between six and 199 workers) in February 2020 (pre-pandemic).
Four waves of the household survey were conducted in Morocco and Tunisia centred around November 2020, February 2021, April 2021 and June 2021. Two waves were conducted in Egypt and Jordan centred around February and June 2021.
Two waves of the enterprise surveys were conducted in each of the four countries corresponding to the first and second quarter of 2021. Household and enterprise surveys were conducted in Sudan as part of the same series, but are not discussed here.
Health and economic outcomes in the pandemic
Among the four countries, Jordan and Tunisia experienced much higher rates of Covid-19 cases and deaths in the first half of 2021 than either Egypt or Morocco. But while Egypt gradually loosened its closure measures in 2021, Morocco, like Jordan and Tunisia, maintained more stringent measures than the world average.
Egypt was also the only one among the four countries that managed to maintain a positive economic growth rate of 1.5% in 2020. In contrast, Tunisia experienced a large economic contraction of 8.8% and Morocco likewise contracted 6.3%, while Jordan’s economy contracted by 1.6%. Despite relatively strong recoveries in Morocco and Tunisia in the first half of 2021, their economies, as well as that of Jordan, remained depressed relative to pre-pandemic levels.
The tourist and transport industries were the hardest hit in all four countries, with tourism-related industries the most negatively affected in terms of closures, reduced hours and revenue losses.
Labour market outcomes
The evidence suggests that aggregate labour market indicators, such as labour force participation, employment and unemployment rates, were recovering in the first half of 2021, except in Morocco where the progress made earlier in the year later reversed. With the exception of Morocco, more of those who lost jobs early in the pandemic were regaining employment over the course of 2021.
Private wage workers, especially those hired informally, faced substantially more challenges related to layoffs/suspensions and wage reductions in Egypt, Jordan and Tunisia than in Morocco. But the prevalence of these challenges decreased in these three countries from February to June 2021, while it increased in Morocco.
The results of the household and enterprise surveys suggest that microenterprises were the most likely to be closed due to Covid-19 in the first quarter of 2021. If open, micro and small firms were more likely to have reduced hours than medium firms.
As Figure 1 shows, a similar proportion of microenterprises across the four countries reported substantially reduced revenues, but higher proportions of small and medium enterprises reported such revenue losses in Jordan and Morocco than in Egypt and Tunisia in the first quarter of 2021.
Figure 1: Revenue change (past 60 days versus 2019), by firm size in February 2020 and country, micro, small and medium enterprises (percentage), quarter one, 2021.
Source: Krafft et al (2021), based on data from the ERF COVID-19 MENA Monitor Household and Enterprise Surveys
Despite some recovery in employment rates, household income levels remain depressed, with just under a half to two-thirds of households in all four countries reporting income losses in June 2021 compared to pre-pandemic levels. In fact, the share reporting income losses increased from February to June 2021.
As Figure 2 shows, household income losses were highest for the households that were poorest pre-pandemic, confirming the adverse effects of the pandemic on poverty and inequality.
Figure 2: Changes in household income from February 2020 to June 2021 (percentage of households), by country and February 2020 income quartile
Source: Krafft et al (2022), based on COVID-19 MENA Monitor Household Survey in June 2021.
Social support reached a relatively limited fraction of the population, except in Jordan, where it reached 53% in February and 44% in June 2021. Assistance was generally well-targeted, reaching a higher proportion of lower-income households than higher-income households. But while targeting efficiency improved in Morocco over time, it deteriorated in Egypt.
Targeting of assistance was generally not based on the workers’ vulnerability with respect to labour market status, again with the possible exception of Jordan, which successfully targeted irregular and informal workers.
It appears that firms in Jordan and Morocco were experiencing more difficulty than firms in Egypt and Tunisia due to the Covid-19-induced crisis in the first quarter of 2021. Although the Tunisian economy had the deepest overall downturn in 2020, it appears to have recovered somewhat by the first quarter of 2021 so that the adverse effects on firms were reduced.
The downturn in Egypt appears to be shallower than in the other countries, sparing Egyptian firms the worst of the negative outcomes. Yet in all countries, there is a clear need for continuing support, especially targeted to the most affected industries and firms, as the economic effects of Covid-19 continue to affect micro, small and medium enterprises.
Support for firms
Although policies were instituted in all four countries to support firms through the crisis, the reach of these policies appears to have been limited. A half to three-quarters of small and medium enterprises reported they had not applied for or received any government assistance.
The most common type of support received (and needed) in all four countries was business loans, but firms in Morocco and Tunisia also report needing (and sometimes receiving) salary subsidies. A substantial proportion of firms in all four countries also expressed the need for reduced or delayed taxes.
The featured top image is for illustration and is credit to Reuters
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