The Economic Impact of COVID-19 in MENA Region

The rapid unprecedent spread of Covid-19 pandemic confronted mankind with grave challenges relating to the threat of the virus itself and about how to provide pharmaceutical solution, while redressing the simultaneous colossal supply and demand shock inflected on the economy.

The lack of prior understanding of worldwide superspreading events, such as the Covid-19, combined with the lockdown measures imposed on the economic activities to contain the virus in absence of effective anti-virus, has constrained the ability of policy makers in many countries to choose strategically in the face of growing uncertainty, lack of information and looming risks. The cost of disrupting the market mechanisms brought by the current solution, are likely to persist for many years and dwarf the cost of the 2008 financial and economic crisis, (Jenny 2020).

The continuing challenge and uncertainty of the Covid-19 pandemic as well as the strong heterogeneity of country-specific response to the virus and resultant economic cost motivate this research to review the extent to which health, economic and security impacts of the pandemic shock are playing out in MENA countries, including reviewing the policy mix deployed to confront the disease in addition to the policies needed to start and sustain the post-Covid-19 economic recovery, if any, or reintroduce the lockdown.

The project will try to answer the following questions: What is the prevalence rate, and how did the cases and death toll evolve in MENA region? How did the healthcare system respond? How is economic performance measured by real growth impacted by Covid-19? What are consequences on public resource mobilization (tax and customs)? How effectively countries cushion in terms of strengthening their fiscal institutions and adopting tax digitization for expanding the resource mobilization base? What are the welfare benefits of drawing resources from the SWFs to insulate the economy from the impact of Covid-19 lockdown compared to the alternative of borrowing from elsewhere? How the SWFs behave in response to declining oil revenues driven by the pandemic predicament? How the pandemic impacted the drivers of inflation? How supply and demand disruptions and the resultant fiscal and monetary responses contributed to inflation dynamics and measurement bias? How the pandemic impacted labor market in terms of employment, remittances and unemployment? Who is affected the most, in particular, how do females fair? What policies put in place to shield workers, and how labor market participation evolved? How the pandemic-mitigating-policy responses such as fiscal transfers to the workforce as well as business tax exemptions can contribute to formalization of informal laborers and firms that are typically most exposed to the Covid-19 shock?

ERF acknowledges the generous financial contribution of the World Bank.