Covid-19, oil price fall would cost Mena economies Dh426B, says World Bank
A large number of foreign workers have jobs in oil-exporting GCC countries who remit billions of dollars every month outside the region.
Dubai - Global body calls for greater transparency as region braces for unprecedented dual shock
By Waheed Abbas
Published: Fri 10 Apr 2020, 10:48 PM
Last updated: Sun 9 Aug 2020, 12:44 AM
Economies in the Middle East and North Africa will face $116 billion (Dh425.7 billion) in costs from the impact of coronavirus and the drop in oil prices in 2020, according to World Bank forecasts.
It also called for greater transparency as the region braces for an unprecedented dual shock.
"The Covid-19 pandemic is affecting Mena economies across four channels - the deterioration of public health; falling global demand for the region's goods and services; declines in Mena domestic supply and demand because of social distancing measures; and, importantly, falling oil prices," it said in an update.
It said the price drop in oil imports is indirectly due to a decline in remittances, investment and capital flows from oil exporting countries of the region. A large number of foreign workers have jobs in oil-exporting GCC countries who remit billions of dollars every month outside the region.
Oil prices have continued to plunge this week and strains on Gulf economies are mounting.
Oil prices closed sharply lower on Thursday. Brent futures fell $1.36, or 4.1 per cent, to settle at $31.48 a barrel, while US West Texas Intermediate (WTI) crude dropped $2.33, or 9.3 per cent, to settle at $22.76. The market was closed on Friday for a holiday.
The World Bank has recommended that regional governments will have to work on two parallels simultaneously to over the challenges.
They are addressing the health emergency and associated economic contraction as well as the enactment of budget-neutral reforms such as debt transparency and restructuring of state-owned enterprises.
Governments in the Mena region have taken steps to limit the economic fallout.
Central banks across the region have cut interest rates this week and policymakers have generally instructed banks to waive mortgage and loans repayments and provide access to credit for heavily affected firms.
"All told, these actions should mitigate some of the impact of the coronavirus outbreak and it would not be a surprise to see further measures announced over the coming weeks. But this will not avert a sharp economic downturn," Capital Economics said.