Chapter 2. A Tenuous and Uneven Economic Recovery in an Ongoing Pandemic

Main takeaways

• The World Bank estimates that MENA’s regional GDP contracted by 3.8 percent in 2020 and forecasts it to grow by 2.8 percent in 2021. • The recovery is tenuous in that most economies in MENA are expected to reach levels of GDP per capita in 2021 that remain below the levels of 2019. • The recovery is expected to be uneven because the region-wide estimates mask differences across countries and within countries.

Economies in the Middle East and North Africa (MENA) are experiencing a tenuous and uneven economic recovery amidst the ongoing Covid-19 pandemic. The World Bank estimates that MENA’s GDP contracted 3.8 percent in 2020 and forecasts it to grow by 2.8 percent in 2021 (see Data Appendix Table B1).

The modest GDP growth in 2021 is 0.6 of a percentage point higher than the forecast made in April 20211 (see Data Appendix Table B2). Still, the region in aggregate would remain 1.1 percent below its pre-pandemic GDP level (see Figure 2.1 Panel A). Overall, the output cost of the Covid-19 crisis thus far in MENA is almost $200 billion dollars, a number derived by comparing the region’s forecast GDP level with that of the no-Covid-19 scenario. Moreover, the potential for new virus mutations causes much uncertainty about the economic outlook, especially in countries that lag in vaccinations.

GDP per capita is arguably a more precise measure of the region’s standard of living than GDP which, in the case of MENA, conveys a similar though more sobering message. The region’s average real GDP per capita is forecast to increase by only 1.1 percent in 2021 after declining an estimated 5.4 percent in 2020. The region’s real GDP per capita in 2021 would thus be 4.3 percent below its level in 2019 (see Figure 2.1 Panel C).

The GCC as a group is forecast to grow 2.6 percent in 2021 after contracting 5.0 percent in 2020, and other developing oil-exporting countries (OEC) are forecast to grow 3.2 percent in 2021 after contracting 3.0 percent in 2020. On the other hand, partly from an expected rebound in tourism and other economic activities, the region’s oil-importing countries (OIC) are forecast to grow 2.8 percent in 2021, after contracting by an estimated 2.2 percent in 2020.

The recovery in GDP levels is also forecasted to be uneven across MENA country groups. In 2021, the GDP level for the GCC countries is forecasted to be 2.5 percent below the pre-pandemic level. However, the OEC and OIC will fare better because they did not experience as severe a contraction in 2020 as the GCC did. GDP levels of the OEC and OIC are forecast to exceed their pre-pandemic GDP levels (see Figure 2.1 Panel B). To be noted is that the OIC’s performance is dominated by the recovery of the Egyptian economy, which accounts for more than half of this group’s GDP.

1 In April 2021, World Bank economists forecasted the region’s economic growth in 2021 would be 2.2 percent.