- COVID-19, the Ukraine-Russia war, commodity price woes, and high inflation leave the Middle East and North Africa (MENA) region on an unacceptably slow growth trajectory.
- Countries’ economic fallout is also worsened by rising debt, currency depreciation, and negative impacts of natural disasters.
- As a result of these shocks, the human toll on the livelihoods of the people across MENA is very devastating.
Millions of people across economies in the Middle East and North Africa (MENA) are grappling with a number of challenges attributable to the adverse impact of global economic upheavals.
The global shock fueling economic fallout includes the COVID-19 pandemic, the Ukraine-Russia war, commodity price swings, and high inflation. Rising debt burdens, currency depreciations in middle-income economies, and the consequences of natural disasters linked to climate change are also to blames.
As a result of the sequence of these global shocks, the human toll on the livelihoods of the people of MENA has been devastating. There has been a broad-based loss of jobs, unemployment, and inflation all leading to extreme deterioration of the quality of life in this region.
Towards the end of the COVID-19 period last year, the region experienced a temporary respite, thanks in part to a growth bubble induced by rising oil prices. However, it’s worth noting that this period of relief was primarily beneficial for high-income oil-exporting nations.
For the majority of the remaining MENA countries, it has otherwise been a period of declining economic fortunes over the past few years. The region’s workforce bore the brunt of these global shocks, as businesses struggled, resulting in widespread job losses and reduced salaries for employees.
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MENA job losses
The far-reaching consequences of the global shocks reverberated within the MENA region, where job losses and salary cuts became commonplace. In many households, income levels either dwindled considerably or, at the most severe end of the spectrum, disappeared entirely. “The macroeconomic shocks of 2020-22 led to an additional 5.1 million individuals becoming unemployed in MENA,” the World Bank revealed.
Moreover, as household incomes dwindled or faced reductions, the cost of living went up. This was driven by factors such as food inflation, escalating energy expenses, and rising interest rates.
To compound matters, as policymakers endeavored to adapt to the new realities posed by the global shocks through fiscal and monetary measures like currency depreciations, citizens witnessed the diminishing value of the limited funds they had left.
For many in these countries, their livelihoods have been caught in the crossfire of inflationary pressures linked to currency fluctuations.
Economic experts at the World Bank and other international financial institutions cite what they refer to as “trade-offs” confronting labour markets in the MENA region as leaders grapple with multiple macroeconomic shocks.
One pivotal trade-off pertains to the balance between job losses and diminishing real incomes. This situation advocates for adaptable real wages and policy options centered around the well-being of the most vulnerable in society.
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How can MENA protect its most vulnerable?
In the face of these global economic shocks, policymakers in the MENA region must mitigate their severe impact on the most vulnerable. While the harm is already done, the crucial question is whether these repercussions will result in enduring scars and permanently reshape the fate of the MENA population.
The World Bank provides insight into this inquiry, asserting that the lasting and potentially fatal nature of the damage hinges on the actions taken by MENA leaders today.
Termed a ‘Balancing Act,’ the World Bank’s Economic Update for the MENA region delves into the enduring consequences of even temporary macroeconomic shocks.
“The report highlights the human side of the macroeconomic uncertainty that is currently permeating the global economy and, particularly, the MENA region,” explains Ferid Belhaj, the World Bank Vice President MENA region and author of the report.
The report signals a significant growth slowdown in the MENA region for 2023, with distinct patterns among oil exporters and importers.
It distinguishes between developing oil exporters and importers, projecting a higher growth rate of 3.6 per cent for importers compared to 2.4 per cent for exporters in 2023.
Evidently, the well-being of people in both MENA segments hinges on a straightforward factor: increased household income, or growth in income per capita. Unfortunately, the outlook is bleak, as the report warns that income per capita in the MENA region will decelerate from 4.3 per cent in 2022 to a mere 0.4 per cent in 2023.
MENA’s economic challenges
“In other words, we are back where we started in the 21st century; MENA continues to be on an unacceptably low growth path,” decries the report author.
“I ask once again, as I have during the past five years: if the region grows slowly with growth spurts followed by decelerations, how will the 300 million young people who will be knocking at the door of the labour market by 2050 find jobs with dignity?”
He calls on policymakers saying “in the midst of macroeconomic upheavals, we must not lose sight of the paramount concern: the well-being of individuals in the MENA region.” This remains especially pertinent, as headlines often celebrate the macroeconomic achievements of MENA’s leaders, while the micro-level, which truly impacts people’s livelihoods, often tells a different story, one that cannot be overlooked.
“As we navigate the current economic context, which is marked by a heightened volatility in terms of trade stemming from Russia’s invasion of Ukraine, a global surge in interest rates, currency depreciations, and inflationary pressures, we should keep sight on what matters, which is the livelihoods of the people,” he reminds the regions’ leaders.
Moreover, the author underscores that “labor markets in the MENA region share similarities with those in other emerging market and developing economies (EMDEs).” Nevertheless, a critical distinction emerges: “the response of unemployment during economic downturns, which in MENA is nearly double that of other EMDEs.”
Economic insights from the World Bank
This crucial fact, highlighting that “unemployment during economic downturns in MENA is nearly double that of other EMDEs,” signifies that the MENA region suffers a significantly greater loss of employment in comparison to its EMDE counterparts.
Between 2020 and 2022, the MENA region experienced the loss of approximately 5 million jobs and a severe decline in real incomes. What exacerbates the situation is that, while individuals lost their jobs, they also saw the value of their currency diminish due to the monetary measures enforced by their leaders, such as currency devaluation.
In essence, this implies that not only did individuals lose their jobs and their primary income source, but they also witnessed the erosion of their monetary assets. It’s akin to a double-edged sword cutting through the lives of the MENA population during these global economic upheavals.
“Our present concern and proactive engagement in shaping the right policies for immediate crisis responses are pivotal. Without proper policy reforms, we could inadvertently worsen the enduring structural challenges faced by MENA’s labor markets as far as the eye can see,” he warns.
“Labor market conditions are not just numbers on a chart, they hold the power to shape our economic well-being and the very foundations of our society,” concludes the Vice President.
