Trade and integration — within the Middle East and North Africa (MENA) region and with the rest of the world — will be critical to lowering poverty, empowering the poor, and igniting economic growth in the post-COVID era, according to the World Bank’s latest regional economic update.
The report, titled Trading Together: Reviving Middle East and North Africa Regional Integration in the Post-Covid Era, paints a comprehensive picture of MENA’s economic situation six months into the COVID-19 pandemic. It examines the lasting effects of the dual economic shocks from the spread of the coronavirus and the collapse in oil prices, and it recommends policy changes and reforms to build a new integration framework across the region.
“The MENA region was already lagging behind economically before the COVID-19 pandemic struck. Six months into it, we can see — with stark clarity — the severity of the devastation on lives, livelihoods, and region-wide prosperity,” Ferid Belhaj, World Bank Vice President for the Middle East and North Africa, said. “We are continuing to help MENA countries stop the spread of the disease and protect and care for their people. We will keep insisting on the need for MENA countries to give the highest priority to transparency, governance, the rule of law and market contestability, and to instill trust, promote the private sector, and build a new framework for the sustained regional economic integration that will make trade a powerful tool to alleviate poverty and expand access to opportunities for all.”
The Economic Shocks of the Pandemic and Decline in Oil Prices
The dual economic shocks of the COVID-19 pandemic and decline in oil prices have affected all aspects of MENA’s economies, which are projected to contract by 5.2% in 2020 — 4.1 percentage points below the forecast in April 2020, and 7.8 percentage points worse than the forecast in October 2019. The latest data reflect an increasingly pessimistic outlook for the regional economy, which is expected to recover only partially in 2021.
The outlook for MENA’s current account and fiscal balances has also deteriorated. Driven by lower oil export revenue, declines in other fiscal revenues, and the high expenditures required to respond to the pandemic, the region’s current account and fiscal balances in 2020 are forecast at -4.8% and -10.1% of GDP respectively, much lower than the forecasts from October 2019. Public debt is projected to rise significantly in the next few years, from about 45% of GDP in 2019 to 58% in 2022.
“The pandemic continues to inflict economic losses, and the poor and vulnerable are being disproportionately affected,” said Ha Nguyen, Senior Economist and co-author of the report. “The growth outlook for 2021 suggests that a V-shaped recovery is unlikely, although the forecasts are fluid and subject to great uncertainty.”
Trade and Regional Integration
According to the report, MENA’s integration — both within the region and with the rest of the world — was underperforming before the pandemic. This is due to economic reasons, such as poor logistics’ performance, inefficient customs, high infrastructure costs, the inadequacy of legal frameworks for investments, and disparate regulations that add up to high trade costs and have become non-tariff impediments to trade. Political economy obstacles have also prevented regional cooperation, while the effects of conflicts and violence have hindered trade and deterred economic growth.
Challenges with logistics and the business environment impede MENA’s integration in regional and global value chains. Despite improvements in recent years, the MENA region underperforms in access to credit, which is lower than anywhere else in the world. Trading across borders is expensive and time-consuming: It costs, on average, US$442 and 53 hours to comply with border requirements for exporting, which is three times more expensive and four times longer than averages in high-income economies. MENA is also one of the most restrictive regions regarding trade in services.
“The challenges to overcoming the political and economic obstacles to MENA’s integration would be difficult in ordinary times, let alone in the midst of a pandemic and economic crisis,” said Blanca Moreno-Dodson, Manager of the Center for Mediterranean Integration and leader of the report. “But the COVID-19 pandemic offers a great opportunity for MENA countries to rethink their social and economic policies and strengthen trade integration while reducing their oil dependency at the same time.”
The report proposes a new trade integration framework that goes beyond reducing tariffs. Some of the suggestions it makes indicate that trade liberalization must be comprehensive and benefit all sectors, including agriculture and services. Without improving the overall business environment and without encouraging the role of the private sector, the region will not reap the benefits of trade liberalization. In terms of implementation, a better balance between political and economic objectives will be needed to ensure that trade agreements do not fail. Simultaneous, behind-the-border reforms — within the MENA region and in collaboration with Europe and Africa — necessitate clear rules and effective implementation mechanisms.
A coordinated MENA trade integration framework would facilitate regional value chains and pave the way toward integrating into global value chains. The report recommends focusing on trading regionally in sectors such as food security, health systems, renewable energy, and the knowledge economy. It suggests creating a common MENA digital market so that MENA countries can improve both trade and digital connectivity, with broader markets in Africa and the Mediterranean. This should help increase productivity; coordinate efficient responses to the pandemic; and promote inclusive, resilient, and sustainable jobs in the region.
The African Continental Free Trade Area (AfCFTA) offers an opportunity for MENA and sub-Saharan Africa to simplify and harmonize non-tariff measures between them. Ongoing bilateral dialogue with the European Union could at the same time focus on including agriculture and services, which would greatly benefit MENA countries while addressing issues of labor mobility as they relate to trade.
Zimbabwe’s Economy is Set for Recovery, but Key Risks Remain
Gross Domestic Product (GDP) growth in Zimbabwe is projected to reach 3.9 percent in 2021, a significant improvement after a two-year recession, according to the World Bank Zimbabwe Economic Update (ZEU) launched today.
Economic growth this year will be led by recovery of agriculture as rains normalize, businesses adjust to limitations caused by the COVID-19 (coronavirus) pandemic, and inflation slows down. However, disruptions caused by the pandemic will continue to weigh on economic activity in Zimbabwe, limiting employment growth and improvements in living standards.
The ZEU, Overcoming Economic challenges, Natural Disasters, and the Pandemic: Social and Economic Impacts, provides the World Bank perspective on macroeconomic and poverty developments and discusses ways to strengthen public service delivery in key sectors. This is the third economic update for Zimbabwe produced by the World Bank. Economic Updates are a standard World Bank tool for macroeconomic and fiscal monitoring.
The ZEU notes that economic recovery is expected to strengthen further in 2022 with GDP growing at 5.1 percent as the deployment of vaccines intensifies and implementation of National Development Strategy 1 (2021-2025) bears fruits. Overall, the COVID-19 global contagion continues to pose significant downside risks, and thus the global and local outlook remains uncertain. A prolonged pandemic, weaker global demand, and heightened macroeconomic instability could choke economic growth, increase poverty, and worsen human capital development outcomes.
Mitigating these risks requires domestic policies to strengthen and sustain macroeconomic stability – which is critical for consolidating economic recovery. Recent efforts to stabilize prices through rule-based monetary and exchange rate policies have been effective and must be continued and expanded. Fiscal policies supportive of these efforts have thus focused on avoiding monetary financing and quasi-fiscal activities, reducing distortive subsidies, and improving fiscal and debt transparency.
“Improving the country’s growth prospects will require further attention to policies that strengthen the quality of service delivery in the social sectors. Preserving lives during an unprecedented that protects livelihoods, strengthens social protection, improves food security, and ensures better education outcomes,” said Mukami Kariuki, World Bank Country Manager.
Facing tight public finances and limited recourse to external financing, Zimbabwe will need to rely mostly on reallocating domestic resources to optimal public uses and leveraging private financing and humanitarian support where possible. Addressing underlying challenges in health, education, social protection, and food security will require sustained financing, strengthened accountability frameworks and investments in appropriate management information systems.
The ZEU reviews developments in 2019 and 2020; and emerging trends in 2021. Part One of the ZEU provides an overview of the macroeconomic and poverty context. Part Two assesses the impact of COVID-19 and other exogenous shocks on delivery of basic services to the poor and proposes mitigating actions for discussion. It also summarizes key policy options needed to stabilize Zimbabwe’s economy, minimize the social costs of the transition, and prepare for an economic recovery.
Slow jobs recovery and increased inequality risk long-term COVID-19 scarring
The labour market crisis created by the COVID-19 pandemic is far from over, and employment growth will be insufficient to make up for the losses suffered until at least 2023, according to a new assessment by the International Labour Organization (ILO).
The ILO’s World Employment and Social Outlook: Trends 2021 (WESO Trends) projects the global crisis-induced ‘jobs gap’ will reach 75 million in 2021, before falling to 23 million in 2022. The related gap in working-hours, which includes the jobs gap and those on reduced hours, amounts to the equivalent of 100 million full-time jobs in 2021 and 26 million full-time jobs in 2022. This shortfall in employment and working hours comes on top of persistently high pre-crisis levels of unemployment, labour underutilization and poor working conditions.
In consequence, global unemployment is expected to stand at 205 million people in 2022, greatly surpassing the level of 187 million in 2019. This corresponds to an unemployment rate of 5.7 per cent. Excluding the COVID-19 crisis period, such a rate was last seen in 2013.
The worst affected regions in the first half of 2021 have been Latin America and the Caribbean, and Europe and Central Asia. In both, estimated working-hour losses exceeded eight per cent in the first quarter and six per cent in the second quarter, compared to global working-hour losses of 4.8 and 4.4 per cent in the first and second quarter, respectively.
Global employment recovery is projected to accelerate in the second half of 2021, provided that there is no worsening in the overall pandemic situation. However this will be uneven, due to unequal vaccine access and the limited capacity of most developing and emerging economies to support strong fiscal stimulus measures. Furthermore, the quality of newly created jobs is likely to deteriorate in those countries.
The fall in employment and hours worked has translated into a sharp drop in labour income and a corresponding rise in poverty. Compared to 2019, an additional 108 million workers worldwide are now categorized as poor or extremely poor (meaning they and their families live on the equivalent of less than US$3.20 per person per day). “Five years of progress towards the eradication of working poverty have been undone,” the report says, adding that this renders the achievement of the UN Sustainable Development Goal of eradicating poverty by 2030 even more elusive.
The COVID-19 crisis has also made pre-existing inequalities worse by hitting vulnerable workers harder, the report finds. The widespread lack of social protection – for example among the world’s two billion informal sector workers – means that pandemic-related work disruptions have had catastrophic consequences for family incomes and livelihoods.
The crisis has also hit women disproportionately. Their employment declined by 5 per cent in 2020 compared to 3.9 per cent for men. A greater proportion of women also fell out of the labour market, becoming inactive. Additional domestic responsibilities resulting from crisis lockdowns have also created the risk of a “re-traditionalization” of gender roles.
Globally, youth employment fell 8.7 per cent in 2020, compared with 3.7 per cent for adults, with the most pronounced fall seen in middle-income countries. The consequences of this delay and disruption to the early labour market experience of young people could last for years.
The pandemic’s impact on young people’s labour market prospects is laid out in greater detail in an ILO brief published alongside the WESO Trends. The Update on the youth labour market impact of the COVID-19 crisis also finds that gender gaps in youth labour markets became more pronounced.
“Recovery from COVID-19 is not just a health issue. The serious damage to economies and societies needs to be overcome too. Without a deliberate effort to accelerate the creation of decent jobs, and support the most vulnerable members of society and the recovery of the hardest-hit economic sectors, the lingering effects of the pandemic could be with us for years in the form of lost human and economic potential and higher poverty and inequality,” said ILO Director-General, Guy Ryder. “We need a comprehensive and co-ordinated strategy, based on human-centred policies, and backed by action and funding. There can be no real recovery without a recovery of decent jobs.”
As well as looking at working hour and direct employment losses, and foregone job growth, the WESO outlines a recovery strategy structured around four principles: promoting broad-based economic growth and the creation of productive employment; supporting household incomes and labour market transitions; strengthening the institutional foundations needed for inclusive, sustainable and resilient economic growth and development; and using social dialogue to develop human-centred recovery strategies.
Universal Access to Sustainable Energy Will Remain Elusive Without Addressing Inequalities
During the last decade, a greater share of the global population gained access to electricity than ever before, but the number of people without electricity in Sub-Saharan Africa actually increased. Unless efforts are scaled up significantly in countries with the largest deficits the world will still fall short of ensuring universal access to affordable, reliable, sustainable, and modern energy by 2030, according to Tracking SDG 7: The Energy Progress Report released today by the International Energy Agency (IEA) the International Renewable Energy Agency (IRENA), the UN Department of Economic and Social Affairs (UN DESA), the World Bank, and the World Health Organization (WHO).
According to the report, significant progress has been made since 2010 on various aspects of the Sustainable Development Goal (SDG) 7, but progress has been unequal across regions. While more than one billion people gained access to electricity globally over the last decade, COVID’s financial impact has made basic electricity services unaffordable for 30 million more people, the majority located in Africa. Nigeria, the Democratic Republic of Congo and Ethiopia had the biggest electricity access deficits, with Ethiopia replacing India in the Top 3.
Globally, the number of people without access to electricity declined from 1.2 billion in 2010 to 759 million in 2019. Electrification through decentralized renewable-based solutions in particular gained momentum. The number of people connected to mini grids has more than doubled between 2010 and 2019, growing from 5 to 11 million people. However, under current and planned policies and further affected by the COVID-19 crisis, an estimated 660 million people would still lack access in 2030, most of them in Sub-Saharan Africa.
At the same time, some 2.6 billion people remained without access to clean cooking in 2019, one third of the global population. Largely stagnant progress since 2010 leads to millions of deaths each year from breathing cooking smoke, and without rapid action to scale up clean cooking the world will fall short of its target by 30 percent come 2030. The state of access in the Sub-Saharan African region is characterized by population growth outpacing gains in the number of people with access, so that 910 million in the region lack access to clean cooking. The top 20 access-deficit countries account for 81 percent of the global population without access to clean fuels and technologies. Of these, the Democratic Republic of the Congo, Ethiopia, Madagascar, Mozambique, Niger, Uganda and Tanzania had less or equal to 5 percent of their populations with access to clean cooking. On a positive note, Indonesia, Cambodia and Myanmar have made gains each year over the report period.
The report examines various ways to bridge the gaps to reach SDG7, chief among them the goal of significantly scaling up renewables – which have proven more resilient than other parts of the energy sector during the COVID-19 crisis. While renewable energy has seen unprecedented growth over the last decade, its share of total final energy consumption remained steady as global energy consumption grew at a similar rate. Renewables are most dynamic in the electricity sector, reaching around 25 percent in 2018, while progress in the heat and transport sectors have been much slower.
More than one third of the increase in renewable energy generation in 2018 can be attributed to East Asia – driven by large uptakes of solar and wind energy in China. The largest country-level advances in renewable energy in 2018 were observed in Spain, owing to higher hydropower generation, followed by Indonesia where a rapid uptake of bioenergy for power generation played a substantial role. To significantly increase the share of renewable energy in line with the SDG 7 target, current efforts need to accelerate in all end-use sectors to scale uptake of renewables while containing total energy demand.
Energy intensity improvements (a proxy for energy efficiency) are moving further away from the target set under SDG7 for 2030. The rate of global primary energy intensity improvement in 2018 was 1.1 percent compared to 2017, the lowest average annual rate of improvement since 2010. The annual improvement until 2030 will now need to average 3 percent if we are to meet the goal.
Accelerating the pace of progress across all regions and indicators will require stronger political commitment, long-term energy planning, and adequate policy and scale incentives to spur faster uptake of sustainable energy solutions. Although clean energy investments continue to be sourced primarily from the private sector, the public sector remains a major source of financing and is central in leveraging private capital, particularly in developing countries and in a post-COVID context. One of the newest indicators in the report, international public financial flows to developing countries, shows that international financial support continue to be concentrated in a few countries and failing to reach many of those most in need. Flows to developing countries in support of clean and renewable energy reached $14 billion in 2018, with a mere 20 percent going to the least-developed countries, which are the furthest from achieving the various SDG7 targets. An increased emphasis on “leaving no one behind” is required in the years ahead.
This is the seventh edition of this report, formerly known as the Global Tracking Framework (GTF). This year’s edition was chaired by the United Nations Statistics Division.
The report this year comes at a crucial time as Governments and stakeholders are gearing up for the UN High-level Dialogue on Energy, a summit-level meeting in September 2021 that will examine steps needed to achieve SDG7 by 2030 and mobilize voluntary commitments and actions in the form of Energy Compacts.
Funding for the report was provided by the World Bank’s Energy Sector Management Assistance Program (ESMAP).
Kenya Receives $750 million Boost for COVID-19 Recovery Efforts
To reinforce Kenya’s resilient, inclusive and green economic recovery from the COVID-19 crisis, the World Bank approved $750 million in...
World Bank Supports Croatia’s Firms Hit by COVID-19 Pandemic
Tamara Perko, President of the Management Board of the Croatian Bank for Reconstruction and Development (HBOR) and Elisabetta Capannelli, World...
Assessing the trends of Globalization in the Covid Era
Coronavirus largely represents acceleration in existing globalization trends, rather than a full paradigm shift. Globalization has ebbed and flowed over...
Zimbabwe’s Economy is Set for Recovery, but Key Risks Remain
Gross Domestic Product (GDP) growth in Zimbabwe is projected to reach 3.9 percent in 2021, a significant improvement after a...
Carl Schmitt for the XXI Century
For decades, the scholars of international relations have confused the term “New World order” in the social, political, or economic...
Educating Women in Pakistan: A Necessity For National Development
Education is fundamental to the success of any nation. Almost every developed nation recognizes its importance and lays great emphasis...
How has Russia’s economy fared in the pandemic era?
Authors: Apurva Sanghi, Samuel Freije-Rodriguez, Nithin Umapathi COVID-19 continues to upturn our lives and disrupt economic activity across the world....
Economy3 days ago
Rare Earth Elements: Elements of the New trade war
Economy2 days ago
Is Bangladesh falling into a China’s Debt-Trap Like Sri-Lanka?
Europe3 days ago
Failed Diplomacy: A hot tension between Spain and Morocco
New Social Compact2 days ago
Global Health Security: The need for collective action
East Asia2 days ago
Taiwan: The First and Oldest ‘Thorn’ between China and the West
Intelligence2 days ago
Uranium is being traded freely in the open market in India
Terrorism2 days ago
FATF: A Sword of Damocles or a tool of financial discipline?
Middle East2 days ago
Powershift in Knesset: A Paradigm of Israel’s Political Instability