COVID-19 crisis response in MENA countries

 Executive Summary

More than 2.2 million COVID-19 infections have been registered in the MENA region (including Iran, where more than 26,000 people have already died and infection rates continue to surge). Among Arab economies, Iraq has the most confirmed cases, followed by Saudi Arabia and Morocco 1.

Despite varying levels of health system preparedness across the region, MENA countries’ overall health management strategies – characterised by strict containment measures implemented in the very early stages of the outbreak – have proven efficient in limiting human losses and the spread of the pandemic in the region. Following a prudent de-confinement process engaged from May to August, mainly easing restrictions on movement, re-opening of borders and economic activities, new infections have been flattened in the Gulf countries. Unfortunately, an emerging second wave is currently affecting the Maghreb and the most fragile countries in North Africa and the Levant, some of which have re-established stricter measures (local lockdowns, school closures) to contain the virus from spreading too rapidly again. The situation is particularly worrying in Lebanon, which has recorded a continuous increase in cases since the blast that hit the port of Beirut on 4 August, while economic pressures are affecting compliance with lockdown measures.

The pandemic is challenging MENA medical systems, some of which are particularly weak and overcrowded. The situation is, obviously, not the same for the richer Gulf countries, the developing economies in the Levant or North-Africa, or in fragile and conflict-affected countries such as Iran, Syria, Iraq, the Palestinian Authority, Yemen and Libya, where the lack of hospital beds and testing capacities is a cause of concern. The first wave has left public hospitals and their personnel exhausted in Lebanon, Morocco or Tunisia, and has severely impacted public trust on the credibility of official figures and the overall management of the crisis. On the other hand, some countries have adopted rapid, decisive and/or innovative measures to contain the virus, such as the smooth crisis management developed by Jordan, virtual doctors and sanitising robots in the UAE, or ramping up domestic masks and test production in Morocco. Healthcare co-operation and innovation was also considerably boosted, in particular in the area of vaccine research. This highlights the significant differences in between countries in terms of their capacity to react on the healthcare side.

The crisis is also testing the public sector, forcing governments to make quick decisions, manage crisis co-ordination and implement drastic measures to protect communities at risk. Many administrations have demonstrated strong capacity to mobilise and implement prevention measures, while preparing for stimulus packages to support households and firms. This crisis emphasises the importance of underlying structural issues, such as transparency and the fight against corruption, effective public procurement, the maturity of digitalisation and open government approaches, as well as a strengthened role for civil society. Governments’ willingness to collaborate with civil society has been key for effective crisis response in many countries. Public governance measures should be used to ensure the continuity of response and essential services by public institutions, while enhancing public sector resilience and adaptability and restoring the population’s trust in public institutions. The crisis has underscored the need to accelerate public administration reform to create a more professional, efficient, effective, transparent and user-oriented public sector.

Despite the large fiscal packages announced in most countries, the pandemic is already causing a dramatic economic cost, with both a negative demand/supply shock and a shock from the collapse of oil prices.2 As countries have taken a series of containment measures limiting transportation and economic activity, these are strongly weighing on the ability of people to go to work and on businesses to continue contributing to the economy. At the same time, the region suffers from a drop in demand at the regional and at global levels, while most supply chains are disrupted. The effects of containment measures on the services sector, which employs a large number of people in the region (in particular in the tourism industry), will cause wide reverberations if unemployment rises and wages and remittances fall. Further, bottoming crude oil prices have put additional strain on even the region’s wealthiest countries, through reduced investments from Gulf countries, which are the largest investor in the region, as well as substantial lower remittances from Gulf countries and work opportunities in the richer GCC region for nationals of other MENA countries. Overall, the region could lose about USD 42 billion of GDP this year3.

It will be critical to monitor the social consequences of the crisis, especially for the most vulnerable (women, youth, elderly, informal workers, refugees). While welfare provisions and social safety nets were often considerably expanded, the United Nations Economic and Social Commission for West Asia (UNESCWA) estimates that the economic slowdown caused by the pandemic will cause an additional 8.3 million people to fall into poverty4. The pandemic might dramatically increase inequalities. School closures risk weighing on the future development of MENA societies. In light of their demographic weight in the region, ensuring that all young people have the opportunity to succeed at school and develop the knowledge, skills, attitudes and values that will allow them to contribute to society should stand high on the recovery agendas.

The impact of the COVID-19 is testing the region’s fragile resilience. It may further exacerbate regional competition and political instability as well as fragility in some cases. The outbreak of the virus has indeed impacted political developments within MENA economies, and their capacity to restore and support their social contracts is being increasingly questioned. Demonstrations in Algeria and Lebanon have been put to a halt due to the sanitary crisis. Hit by a cataclysmic blast at Beirut’ main port and daily spikes in COVID-19 cases, Lebanon is crippled by the impact of multiple shocks which have exhausted its economy and caused an unprecedented poverty increase, where more than 55% of the country’s population is now trapped in poverty and struggling for bare necessities, as per UNESCWA. In fragile and conflict-affected countries, economic reconstruction plans will need to materialize to provide for minimum levels of stability.

Like for OECD countries, the crisis could, still, offer an opportunity to engage in a comprehensive reform agenda addressing some of the region’s underlying structural issues (decentralisation, private sector development, social protection) and supporting a more inclusive growth model (economic diversification, health and education spending, industrial innovation and participation in regional value chains), building on all segments of the society. Success stories at the national level should be recognised and made widely known. The pandemic is a call to renew the commitment to the Sustainable Development Goals. Looking ahead, in a region with very heterogeneous situations for the capacity of the civil society to operate with autonomy, it will be important to monitor the impact of the pandemic on the rule of law and governance frameworks. Indeed, new laws and controls put in place to contain the pandemic may have long-term negative effects on the space in which the civil society operates. In a moment where the contribution of all to face the unprecedented economic and social challenges is more necessary than ever, empowering people remains critical.

 COVID-19 in MENA countries and measures to contain the pandemic

 Economic and fiscal impacts on the MENA region

The pandemic is causing massive economic turmoil in the region through simultaneous shocks, including a drop in domestic and external demand, low oil prices, disrupted trade and global value chains, a fall in consumer and investor confidence, and tightening of financial conditions. Due to a depressed global demand, commodity prices and volumes have lowered. With widening statistical inequalities and incipient financial fragilities (in particular regarding insolvencies, non-performing loans and access to credit), crisis vulnerability has increased dramatically for developing economies. As a result, GDP growth will be severely affected in 2020. Taking into account the strong containment measures implemented by MENA economies, together with the disruption in global supply chains and the structural characteristics of individual economies, the IMF forecasts all MENA economies, with the exception of Egypt, to contract in 2020, at an average of -4.1%. Latest estimates indicate that growth in the MENA region might fall to -6.6% for oil exporting countries and -1% for oil importing countries in 2020.23 The two most hard-hit countries that are expected to experience the steepest decline in GDP growth are Libya and Lebanon with -66.6% of GDP and -25% respectively.

Fragile and conflict-affected countries are expected to experience a sharp decrease in GDP per capita, raising important challenges in terms of poverty. In Lebanon, which hosts a significant number of refugees principally coming from Syria, the dramatic explosion at Beirut’s main port caused, according to preliminary estimates24, between USD 3.8 and USD 4.6 billion in damage to physical stock, while losses including changes in economic flows as a result of the decline in the output of the economic sectors are estimated to be in the range of USD 2.9 and USD 3.5 billion. Concrete financing and economic reconstruction plans will therefore need to effectively materialize to avoid a full social and economic collapse. Even before the explosion, the estimated headcount poverty rate in Lebanon had increased from 28% in 2019 to 55% in May 2020.25 The situation is expected to be exacerbated in light of the impacts of the blast on incomes as well as on availability and prices of food and basic commodities.

However, it is important to underline the unprecedented fiscal effort that many MENA countries have undertaken to mitigate the consequences of the crisis in support of households and firms. For example, the United Arab Emirates announced a USD 27 billion stimulus plan, including subsidies to water and electricity for citizens and industrial activities, while Egypt developed a USD 6 billion economic relief plan, and Qatar and Saudi Arabia committed to support package of respectively USD 23 billion and USD 13 billion, particularly aimed at their SMEs and private sectors. While the rebound should not be mistaken with a proper economic recovery, the IMF predicts a V-shaped recovery for the region, with nearly all MENA countries expected to recover in 202126.

 

Figure 1. Gross domestic product in selected MENA economies (y-o-y percent change)

Note: e=estimates. EMDE= Emerging Markets and Developing Economies.

Source: International Monetary Fund, World Economic Outlook Database, October 2020.

MENA countries have responded rapidly to mitigate the economic consequences of the crisis on the private sectors and households and keep the financial market functioning. On average, 2.7% of GDP was allocated to fiscal measures, while 3.4% of GDP (over USD 47 billion) in liquidity injection was activated by Central Banks across the region during the first weeks of the crisis. For a more complete overview of the economic measures implemented by MENA economies, refer to Annex 2.

However, such measures also pose challenges in terms of macro-economic stability, in particular in countries with high levels of debt, as the debt of Arab governments raised considerably to fund crisis-related measures, while the cost of borrowing rose significantly. Increasing pressured linked to crisis-related spending will put an important strain on the region’s fiscal deficit, which is projected to increase from 3.3% of GDP in 2019 to 10.8% of GDP in 2020.27 These risks are particularly acute for countries with limited fiscal buffers, such as Algeria, Bahrain, Iraq, Iran, and Oman. This raises concerns in terms of the sustainability of the countries’ economic response, in the context of the recovery. The IMF projects debt-to-GDP levels to reach 95% of GDP on average by the end of 2020 among MENA oil-importing countries.

 Fiscal challenges

Governments have allocated additional resources to the health care sector, but also, as was the case in OECD countries, to support certain sectors of the economy as well as most vulnerable households. Budget deficits are projected to be significantly larger in 2020 than in 2019 (Figure 2) and will increase the public debt (Figure 3). For certain countries, this additional spending, although unavoidable, is therefore increasing pre-existing fiscal imbalances (e.g. Bahrain) or threatening previous consolidation efforts (e.g. Egypt), and consequently generating further fiscal sustainability challenges. Fiscal impacts of the crisis are however less significant for those countries (e.g. Qatar) that were able to tap into their fiscal reserves such as sovereign wealth funds as part of their response to the crisis.

Further fiscal stimulus is likely to be done in virtually all countries of the region in 2021, as the effects of the pandemic will continue unfolding. MENA counties will therefore be faced with similar challenges than those of other countries across the world – that is identifying where spending can be cut and allocating resources to high-priority policies to support the economy and households. In addition, budgeting systems will need to adapt and improve, based on the lessons learned to cope with demands and pressures brought about by COVID-19 crisis. During the pandemic, few MENA countries, for example, published or laid out supplementary budget laws before their legislature and relied on other mechanisms to deliver the spending packages, such as extra-budgetary funds or executive decrees, which sometimes had the effect of limiting the time and scope for public oversight and government accountability on their fiscal policy decisions.

 

Figure 2. Fiscal deficit, General Government, 2019 and 2020

Overall fiscal balance in MENA countries (% of GDP)

Source: IMF staff estimates and projections published in April 2020. Lebanon is not reported, due to the deterioration of the country’s fiscal situation in August 2020. Data unavailable for Libya.

 

Figure 3. Public debt, General Government, 2019 and 2020

Gross debt in MENA countries (% of GDP)

Note: IMF staff estimates and projections published in April 2020. Lebanon is not reported, due to the deterioration of the country’s fiscal situation in August 2020. Data unavailable for Libya.

The following sections focus on some concrete economic consequences specific to the region, including the impact on trade and investment, oil prices, private sector development, remittances and tourism.

 Impact on investment and trade

The OECD expects a drop in global FDI flows by at least 30% in 2020 (most optimistic scenario) compared to 2019 before returning to pre-crisis levels by the end of 202128. The resulting demand and supply shocks, coupled with the drop in oil prices and lower confidence of investors, are expected to lead to even more significant decline of FDI in MENA29. The UN’s Economic Commission for West Asia estimates that the Arab region is likely to lose 45% of its FDI inflows in 2020.30 31

In 2019, global FDI increased by 12% to USD 1 426 billion but was still struggling when COVID-19 hit, remaining below the levels recorded between 2010 and 2017 (see OECD FDI in Figures, 2020). During the same year, FDI inflows in MENA32 amounted to USD 17.2 billion, a 10% increase compared to 2017, but still less than half of the level recorded in 2008, which was a peak year for FDI inflows in the region (Figure 2). There will be an immediate impact on FDI globally and in MENA from a reduction in equity investments, as investors will put greenfield investments and mergers and acquisitions (M&A) on hold. Preliminary estimates suggest that the value of M&A deals already decreased by 71% in the first four months of 2020, from USD 89.6 billion to USD 26.2 billion compared to the same period in 201933. Greenfield investments represent more than 80% of total FDI projects in most oil-importing MENA economies34, while M&A mostly take place in GCC countries.35

 

Figure 4. FDI inflows in the MENA region by instrument, 2008-2019

Note: FDI data includes Algeria, Bahrain (until 2011), Djibouti, Egypt, Iraq, Jordan (from 2009), Kuwait, Lebanon, Libya, Mauritania (from 2012), Morocco, Oman, Syria (until 2010), Tunisia, Yemen (until 2016), and the Palestinian Authority. FDI flows by instruments details are not available for Qatar, Saudi Arabia and the United Arab Emirates, therefore the aggregated bars do not correspond to total FDI flows for the MENA region as a whole. For selected countries, the coverage of instruments in particular reinvestment of earnings may be limited, and some of the instruments may be combined. Given that FDI flows by instruments details were not available for a sufficient number of countries at the time of writing, the overall line for 2019 represents preliminary FDI inflows. 

Source: OECD calculations based on IMF

 

Figure 5. Greenfield FDI in selected MENA economies

Source: The Financial Times’ fDi Markets database

Most MENA economies took immediate investment policy responses to address the crisis. They provided specific sectoral support and encouraged shifting production, notably in free zones, introduced fiscal and financial measures to release pressure on some industries and support contracted economic activities, expanded access to their local market to foreign investors (e.g. in Tunisia and Egypt). Investment promotion agencies (IPAs) are taking emergency actions to sustain and retain existing investment. They set up crisis units to inform and communicate with investors, to respond to their queries and to follow on production disruptions. They are refocusing, redesigning and reinforcing their aftercare services aiming at investment retention, in particular in strategic and essential sectors (e.g. aftercare now represents 70% of the activities of the Foreign Investment Promotion Agency of Tunisia which is solving punctual investors’ problems and encouraging redirection of production lines toward demanded products and services).

The disruptions caused by the pandemic may also affect multinational enterprises (MNE) decisions to reorganise the geographical and sectoral spread of their production activities. MENA countries are starting reflection on how to take into account the implications of such considerations and respond to the new possible configuration of value chains. Tunisia is in the process of positioning itself as a destination for investors, especially manufacturers of automobile components looking to delocalise from US and China into the Southern Mediterranean. There are also plans to revise the current Investment Law to focus on priority sectors, improve the regulatory and institutional structure, and explore better synergies between agencies in charge of investment promotion and facilitation.36

The implications of supply considerations are also important for investments into pharmaceuticals, medical supplies and equipment, and increasingly healthcare provision, which depend much more than in the past on global value chains (see OECD note on the face mask global value chain in the COVID-19 outbreak: evidence and policy lessons). In the MENA region, announced greenfield investments in these sectors have increased by 42% to USD 771 million during 2015-2019, up from USD 544 million during 2004-2008. In the region, ensuring sufficient supply needed to fight the pandemic has become the immediate priority for policymakers in the area of trade and investment. For instance, the Egyptian Ministry of Industry and Trade banned for a period of three months the export of infection prevention supplies, including face masks and alcohol as well as its derivatives.37

 

Figure 6. Greenfield FDI into health-related industries

Note: Data is available for Algeria, Egypt, Jordan, Lebanon, Libya, Morocco, Palestinian Authority and Tunisia

Source: OECD based on fDi Markets (2020)

Strategic options and reflections on recovery also concern renewed investment promotion frameworks, strategies and working methods, enhanced investment facilitation through digitalisation, and investment climate reforms towards stronger opening up (e.g. legal amendments to repeal of the 49/51 rule except in strategic sectors in Algeria, and to allow 100% foreign ownership in many sectors in the UAE and Qatar). The challenge is to build an ambitious trade and investment reform agenda, tackling opportunities to build regional value chains and to attract quality investments that promote a diversified, fair, greener and resilient recovery.

 Impact on remittances

The global disruptions caused by COVID-19 will have a weigh on remittances into the MENA region, particularly from Europe and Gulf countries. The main reason for this impact is that sending countries experience unprecedented economic shocks which translate into lower incomes of individuals transferring remittances. In 2018, the region received remittances totalling USD 62 billion, representing an increase of 9% compared to the previous year. As a result of the crisis, the World Bank estimates that remittances to the MENA region will fall by 19.6% to USD 47 billion in 2020.38

 

Figure 7. Remittance inflows to MENA countries, 2019

Source: World Bank

Among the economies in the region most affected by the decline in remittances caused by COVID-19 are Egypt and Lebanon, but other countries are also expected to experience a decline. Egypt is the fifth-largest recipient of remittances in the world, reaching USD 26.8 billion in 2019 and nearly 10% of GDP. While the value of remittances during January-March was around the usual average of USD 6 billion, a decrease by USD 2.3 billion is expected during April-June 2020. In Lebanon, remittances accounted for USD 7.3 billion (or 12.5% of GDP) in 2019. Migrants’ jobs are at risk in oil-dependent sending countries because of the oil-price drop and this is expected to lead to even less remittances.

According to the IMF, remittances in Tunisia are also expected to decline by 12%, from 5.5% of GDP in 2019 to 4.4% of GDP in 2020. Moving forward, the recovery of remittances will depend on, inter alia, the success of the economic stimulus plans of developed economies but also on the evolution of global migration and labour market dynamics, as many labour-intensive industrial sectors have been particularly hit by the pandemic. Official development finance can also contribute to further reducing transfer costs of remittances. The World Bank foresees remittances to the MENA region to recover in 2021, although at a slow pace of around 1.6%39.

 Impact on oil prices

The COVID-19 pandemic and related confinement measures caused an unprecedented global contraction in economic activity and a collapse in demand for oil products worldwide. In 2020, global oil demand is expected to contract for the first time since the global recession of 2009. At the same time, the decision by some key producers to increase their production in early March compounded the impact on an already oversupplied market, amplifying the imbalances. The result was one of the biggest price shocks in the energy market in history. In April, Brent oil prices dipped below USD 20 a barrel, losing nearly 70% in value and, as storage capacity began approaching its limits, prices for West Texas Intermediate contracts due in May fell into negative territory for the first time40.

 

Figure 8. Estimating the direct impact of the oil price collapse in the countries’ real income (%of GDP change)

This estimation is based on the hypothetical assumption that oil prices will stay 48% below the 2019 level

Source: Graph extracted from the World Bank: Coping with a Dual Shock: COVID-19 and Oil Prices

The demand shock caused by the pandemic presented an opportunity for lower-cost producers to regain market share at the expense of a price collapse.

Reacting to the rapidly deteriorating fundamentals on Thursday 9 April, OPEC, Russia and other producers tentatively agreed to the biggest oil production cuts in history. They decided to withdraw 10 million barrels per day or 10% of global production from the market for the months of May and June. This was strengthened further by the G20 extraordinary ministerial meeting on 10 April, bringing together some of the world’s biggest producers, including the United States, Canada, Brazil and others to discuss concerted action to address the oil market overhang. The strength of the demand destruction, which reached an estimated 25.2 mb/d in April, has rendered any supply side action insufficient to rebalance the market immediately. However, due to lower supply and recovering demand (brought on by the gradual relaxation of the COVID shutdowns), the market would turn from historically high levels of stock build to withdrawal.

For producer economies in the Middle East and North Africa, the lower oil prices have had an immediate impact on economic fortunes. For some, it has once again exposed the fragilities of an economy too dependent on revenues from oil and gas. Oil and gas income in producer economies such as Iraq, Algeria or Oman could fall by as much as 80% in 202041. In Saudi Arabia, for example, oil revenue fell by 24% year-on-year in Q1. The fall in non-oil revenue was of similar scale, reaching around 17% in Q1. The government has responded to the revenue decline by instructing government ministries to cut their expenditure by 20-30%, but this did not happen quick enough to offset the revenue decline, and the quarterly budget fell into deficit amounting to around USD 9 billion. The country also experienced its largest fall in foreign assets in 20 years, and around 50% more than the steepest decline faced after the 2014 price crash.

Short-term measures are strongly reducing economic activity and government spending. In Saudi Arabia but also across the Gulf, the slowdown in economic activity is expected to hit expatriate labour hard, resulting in estimated population declines of between 4% and 10% across the region this year. In Iraq, one of the Middle East’s most oil dependent economies, the situation is grave. In April, oil export revenues fell to USD 1.4 billion (down from USD 6.1 billion in January), leaving a gap of around USD 4.1 billion to meet obligations for essential spending for salaries, pensions and the running of government offices.

Such reductions would reinforce the importance of economic diversification, but also undercut the means to support it. The energy sector has played a vital role in supporting the delivery of healthcare, remote working and many other needs42. Recovery plans should be aligned with long-term national and global objectives on energy resilience and sustainable development, and it is essential that they focus on clean energy transitions if those are to be met. By putting clean energy transitions at the heart of recovery, governments can help to bring about the structural changes needed to ensure that economic recovery is not associated with an unsustainable rebound in CO2 emissions and local air pollution.

 Impact on tourism

Tourism is one of the worst-affected sectors of the economy during the COVID-19 crisis. The shock to the global tourism sector could amount to 45-70% of output depending on the severity of the pandemic. Globally, OECD estimates anticipate a 60% to 80% decline in international tourism, while the World Tourism Organization (UNWTO) forecasts a decline in international tourist arrivals by 58% to 78% in 2020, amounting to a loss of USD 910 to 1170 billion in international tourism receipts.

 

Figure 9. The weight of tourism in MENA economies

Direct and total contribution of the travel and tourism sector to GDP and employment in MENA economies, 2019

Note: Total contribution to GDP refers to the share of GDP generated directly by the Travel and Tourism sector, plus its indirect and induced impacts. Total contribution to employment refers to the share of jobs generated directly by the Travel and Tourism sector, plus the indirect and induced contributions.

Source: World Travel and Tourism Council, 2019.

Tourism represents a major economic pillar for MENA economies and a key component of economic diversification for oil-exporting countries. In 2019, the travel and tourism sector accounted for 5.3% of GDP growth and 6.7 million jobs across the MENA region, according to the World Travel and Tourism Council (WTTC). The containment measures and the hit on economic growth in the United States, the European Union and China, the major international source markets for tourism to the region, have considerably reduced arrivals to the MENA countries. In the first half of 2020, UNWTO reports that the Middle East and North Africa experienced a decline of respectively 57% and 62% in tourist arrivals, close to the global average of 65%44. Preliminary evidence suggests that the situation has worsened over the course of the summer, with STR reporting a 42% drop in occupancy rates in Middle Eastern hotels in July, representing the lowest absolute occupancy level for any July.45

Such decline in tourism activity is expected to have a significant impact in many countries in the region, especially those relying heavily on tourism as a source of income, notably Morocco, Tunisia, Lebanon and Egypt. In Egypt, the International Food Policy Research Institute (IFPRI) estimates that losses in tourism revenues will account for two thirds of total losses in GDP caused by the crisis. According to UNCTAD, Egypt and Morocco are among the countries worldwide that are most affected by GDP losses incurred by the decline in tourism.46 Moreover, the cancellation of major events in the region, including Dubai’s EXPO 2020 and the annual haj pilgrimage in Saudi Arabia, which were expected to attract respectively 25 million visitors and 2 million religious tourists, will put a strain on the countries’ economy. In GCC countries, PwC estimates that up to 400,000 tourism-related jobs could be lost as a result of the crisis. The WTTC’s baseline scenario for recovery issued in June predict an overall loss of 3.4 million jobs in the travel and tourism sector in the MENA region.47

In order to address these challenges, many MENA governments48 have taken initiatives to support the tourism industry in their countries. Measures include specific credit lines for tourism enterprises, as introduced by the Central Bank of Egypt, exemptions from tourism levies and other fees, as implemented in Bahrain and the United Arab Emirates, and debt rescheduling such as in Tunisia.

Particular attention has also been given to the tourism sector in countries’ deconfinement strategies. In Egypt, hotels have been authorised to reopen for domestic tourists at 50% capacity from June onwards, provided they comply with a number of safety measures including testing workers, installing disinfection equipment, assigning a dedicated floor or building as a quarantine area for suspected or positive cases, and implementing social distancing measures.

As the main international source markets for the region are likely to remain constrained for some time, intra-regional and domestic tourism will be crucial for the sector’s recovery. Countries have taken steps to promote domestic tourism, as reflected, for instance, in the “Saudi Summer” campaign launched by the Saudi Tourism Authority in June to encourage residents to travel in the country instead of abroad.

 The crisis is triggering a number of specific social challenges

Governments across the region have made an unprecedented institutional and policy effort to support households and businesses throughout the crisis. Exceptional measures have been taken to ensure that the response also targets groups which usually fall outside of social safety nets, such as informal and seasonal workers, and joint initiatives have been initiated with the private sector and civil society organisations to reach the most vulnerable populations. Bold policies were activated rapidly to mitigate the crisis. In a region traditionally characterised by low levels of social protection expenditure (2.5% and 7.6% of GDP on average respectively in the Mashreq and North Africa56), most governments have shown high levels of adaptability to cope with the social aspects of the crisis. Overall, social protection policy responses in the region have taken six main forms: financial protection in access to healthcare, leave policies, unemployment protection, cash transfers, in-kind support, and price subsidies or fee waivers. Cash transfers have been the most common measure adopted across the region, implemented either through the adaptation of existing schemes or the introduction of new ones.57

Pre-existing vulnerabilities in the region are likely to amplify the impact of the outbreak on businesses and households. Currently, the top 10% richest of the population owns 64% of the wealth, making the MENA region among the most unequal globally.58 Such inequalities are at risk of being exacerbated by the sanitary crisis, as vulnerable groups are disproportionately exposed to the pandemic and its socioeconomic impacts. A recent study conducted in Morocco on the economic situation of households during the confinement found that revenue losses had affected 74% of workers among the 20% most disadvantaged households, compared to 44% of those belonging to the 20% most well-off.59 Exposure and coping ability and mechanisms are directly affected by income levels of both households and regions. Governments have made considerable efforts in their policy response to address these income and social protection gaps by reaching out to the most vulnerable households. Several countries have either topped up or expanded coverage of their social assistance programmes. For example, the Tunisian Ministry of Social Affairs collated its different programs of previous poverty programmes and further made a call for people to come forward to register for financial help. The final tally of people that qualified for help came up to almost 900,000 families. With an average of 2.23 children per family, the number of people concerned with this measure represents roughly one third of the Tunisian population, which is double the amount of the official figures of 15%.60 Informal or unsanitary housing, refugee camps and besieged areas have a significantly lower capacity to contain the spread of the virus and access health services. The exceptional measures disproportionally affect not only the informal workforce but also those who cannot work such as disabled persons, the elderly, children, refugees and migrants (the latter due to legal and other types of obstacles such as lack of documentation etc.), as they do not benefit from coping arrangements such as remote work or paid leave. This represents a lasting pressure on previously existing inequality patterns. Strong gender imbalances in the region also risk being exacerbated as a result of the crisis.

 Informality

MENA economies are characterised by a sharp dichotomy between a formal labour market and a precarious informal economy. Formal private employment is limited and accounts on average for less than a fifth of employment61. Informal employment reaches up to 74% in Yemen, 71% in Lebanon, and 63% in Morocco62 and represents on average 68% of employment in the region63. Informality is generally associated with limited or lack of social protection coverage and low and unstable revenues, making informal workers particularly vulnerable in the face of a crisis. In MENA economies, informal workers are concentrated in low-productivity jobs requiring physical presence, with no possibility to work remotely. In the context of the COVID-19 crisis, the restrictions and confinement measures have thus put an even bigger strain on informal workers’ activity. Many of them face a dilemma between complying with the health measures and maintaining a source of income to pay for their food and other basic expenses.

Migrants represent an important share of informal workers in a number of MENA countries, in particular in the GCC64. As a crucial part of the workforce, they supported the functioning of the healthcare, nursing, transport, agriculture or industrial sector, in particular the oil industry, throughout the crisis. The International Organization for Migration (IOM) and International Chamber of Commerce (ICC) released a special employer guidance65 in August, to advise businesses in addressing the distinctive challenges faced by migrant workers.

At the same time, informal workers are not necessarily beneficiaries of support schemes put in place under this crisis, such as state support for wages. In the short run, countries with large informal sectors could develop ways to support the informal sector through, for example, direct cash transfers or other types of specific support. This has been done in Egypt, where a monthly cash transfer was disbursed for three months to informal workers facing income loss as a result of the crisis. It would also be important to ensure that labour mobility schemes incorporate an inclusion agenda offering migrant workers inclusion into national social security systems from the outset. In the longer run, countries will need to address the root causes of informal activity, which include the lack of employment opportunities, fragile social security systems and weak enforcement. This is particularly important since the COVID-19 pandemic may unsettle or challenge the functioning of social safety nets. For example, in Egypt, the government has expanded coverage under its social assistance programmes Takaful and Karama, which enabled more than 1.5 million vulnerable families to benefit from direct cash transfers during the pandemic. Morocco implemented a transfer programme for informal workers using mobile phones, and has identified the integration of the informal sector in the economy as a strategic pillar of its post-crisis recovery strategy66.

 Gender equality and women’s empowerment

All around the globe the socio-economic consequences of the Covid-19 pandemic have disproportionally hurt disadvantaged groups, with women facing sizeable consequences. In developing and emerging economies, structural weaknesses such as poor competitive environments, corruption, high rates of vulnerable or informal employment, as well as discriminatory legal frameworks and restrictive social norms, have exposed women to additional hardships in terms of job and income loss, mounting care burdens and escalating gender-based violence, among others.

Due to regional-specific barriers related to unequal economic opportunities, access to financial services and markets, occupational and sectoral segregation in the labour market and perceptions regarding women’s role in the society, women’s job and income security is more exposed than men’s to the economic fallout from the crisis. The situation is even more dramatic for women working in the informal sector. Statistics show that 92% of women participating in the labour force in developing countries and 64% in emerging countries are informally employed.67

Large shares of women in MENA economies are employed in sectors that have been particularly hard hit by the pandemic, such as manufacturing, tourism, and business travel services, and have subsequently lost their jobs. Most women are employed in micro and small enterprises, which are less resilient in times of crises and more likely to resort to temporary suspension or termination of contracts to face the economic downturn. Women are also over-represented in part-time employment (up to 50% of employed women in Morocco and the Palestinian Authority hold part-time jobs), which makes them easier to lay-off. Overall, UN Women estimates that women in the Arab world will lose approximately 700,000 jobs as a result of the outbreak. The effects of restrictive social norms have been magnified during the crisis, contributing to women’s greater economic fragility and a heavier care burden. In the MENA region, data show that there is a widespread belief that men should have greater access to jobs than women when work opportunities are scarce.68

Self-isolation measures and movement restrictions in place in most MENA economies also exacerbated women’s exposure to domestic violence. While this trend has been observed globally, it may be particularly acute in the MENA region due to region-specific drivers for gender inequality, such as gender roles that see men as heads of household and responsible for the family income. With the crisis preventing men from upholding this role due to income or job loss, resulting frustrations fuelled domestic violence. Across the MENA region, NGOs and governments have noted an increase in calls through hotlines for reporting violence as well as in the number of cases reported.

The pandemic has had severe consequences for refugees and internally displaced populations, with significant gender impacts. Developing countries host 85% of the world’s refugees, of which 52% are women. The MENA region is currently home to the largest community of forced displaced people at the global level69. Most female refugees have been facing increased hardships in terms of access to essential services, gender-based violence, and economic deprivation. Moreover, refugee girls have been exposed to additional risks of school dropout, female genital mutilations (FGM) and early marriages. These harmful practices are not only major human rights violations, but also obstacles to women’s empowerment, as they undermine girls’ opportunity to receive an education and improve their skills. According to the UN, 13 million girls could be married off and two million more could undergo FGM in the next decade, as the pandemic is disrupting global efforts to end both practices70.

Several MENA countries have taken steps to integrate the specific needs of women in the COVID-19 response. In Algeria and Tunisia, the Ministry of Women’s Affairs is actively involved, alongside other Ministries, in the committees in charge of elaborating the crisis response. In Egypt, the National Council for Women (NCW) monitors from a gender perspective all policy measures that have been undertaken by the government and has recently released the third edition of its women policy tracker on responsive policies and programmes amid the Covid-19 pandemic. However, women in MENA are still lacking leadership roles in crisis response and recovery strategies for post-COVID. While women globally make up over 70% of workers in the health sector worldwide, they are often absent in top government positions. At the regional level, with the exception of Bahrain and Qatar, all ministers of health are men. In Jordan, the private sector-led committee set up by the government to coordinate the response to the crisis does not include women and therefore the needs of women are not taken into account.

To date, only a few public policy actions have focused specifically on supporting women in facing the economic repercussions of the crisis. These include targeted cash transfers to women (Egypt) and exceptional paid leave for women employees (Palestinian Authority, Iraq). Governments have also been providing assistance to women entrepreneurs, with the support of international organisations, often in the form of online training programmes.

Most of governments’ targeted efforts have focused on addressing the surge in gender-based violence. In particular, national domestic violence helplines have extended their operating hours to better support victims and additional phone services have been launched to provide legal and/or psychological assistance. Governments have also taken action to raise awareness on domestic violence issues and improve access to information for victims, in cooperation with civil society and international organisations.

The COVID-19 pandemic represents an opportunity to change prevailing gender norms in the region. Indeed, the crisis has contributed to reveal the major role and potential of women in MENA societies. Women not only represent the majority of front-line emergency responders in the health, social, teaching and care sectors, they have also been very active in setting up initiatives and businesses to support the response to the crisis71. The transition out of the crisis provides a new opportunity to further the agenda for resilient, inclusive and sustainable economies.

 Youth empowerment

While young people tend to face lower risks in terms of physical health impact than other age groups, they are significantly affected by the socio-economic impacts of the COVID-19 crisis72. A recent OECD policy paper on Youth and COVID-1973 highlights that surveyed youth organisations based in MENA countries expressed strongest concerns about the impact of COVID-19 on mental health, education and employment as well as limitations of personal freedoms.74

Snapshot data from April collected for the same paper also shows that, on aggregate, trust in government had increased since the outbreak of COVID-19 for 43% of the youth organisations surveyed worldwide. Nevertheless, concerns are now shifting towards the capacity of governments to ensure a strong recovery. Recovery measures, and the considerable resources they will involve, will have long-term economic, social and environmental consequences that young people and future generations will have to live with, bringing questions of intergenerational justice to the forefront.

Young people are particularly at risk of mental health concerns that can be triggered or aggravated by social distancing measures implemented to different extents in national contexts. The mental toll on youth is confirmed by a number of studies75 76 that show that young adults have experienced higher levels of loneliness and distress during the pandemic compared to other age groups. In the MENA region, more than 110 million school-aged students77 have experienced limited access to education (formal and non-formal) due to closure of school and university facilities, youth centres and other public spaces.

The economic slowdown resulting from the crisis is further exacerbating youth’s vulnerability within the labour market. The MENA region has the highest rate of youth unemployment in the world (exceeding 27% on average) and youth are five times more likely to be unemployed than their adult counterparts78. Moreover, it is estimated that 80% of youth in the region work in the informal sector of national economies79, which generally offer fewer or no benefits or protections and limited possibilities to work remotely. Young people are also more likely to be under temporary contract modalities, often in sectors that have been severely hit by the crisis (such as the tourism sector). In light of that, young people are likely to experience higher unemployment levels and a significant loss of income.

Moreover, the spread of disinformation and fake news is a major concern, as 50% of youth in the region use social media as their primary source of information. However, according to a recent study80, social media account for 88% of the misinformation related to the pandemic. This increases the likelihood of young people to be exposed to disinformation, while also raising fears and undermining trust. The MENA region hosts about 14 million displaced persons81, many of which are young people, more prone to suffer disproportionately both from the crisis and its aftermath, for reasons such as limited availability of water, sanitation, hygiene and hospital facilities as well as restricted movement, lack of employment opportunities or higher risk of exclusion in the society.

At the same time, young people have been playing an active role in mitigating the crisis and preparing for recovery. Many young people and youth organisations are running awareness campaigns, volunteer to support the elderly and vulnerable populations, offer online trainings, share data and engage as researchers or entrepreneurs to contribute innovative ideas to the regional and global response to the COVID-19 crisis82. For instance, in Lebanon, Masar Association83 has organised online trainings for youth on mental health, distributed board games to families, and filmed and disseminated videos with youth on how to spend time in lockdown. In Morocco, Impact for Development has provided a platform to share and disseminate initiatives and data on the current context and how to tackle it.84 In Jordan, youth-led initiatives launched a variety of social media campaigns to encourage young people to stay at home, telework and share information from trusted sources to fight rumours and misinformation. Most recently, youth organisations have given an essential contribution to crisis response in Lebanon following the disastrous explosion in the port of Beirut. Policy responses should take into consideration the potential of young people and other vulnerable groups in mitigating the crisis and building resilience of the MENA societies in the face of future shocks.

In 2018, only 32% of young people expressed trust in their government across 12 MENA countries compared to 46% across OECD countries.85 Governments have now the opportunity to rebuild trust and “build back better” from the crisis by ensuring that recovery plans address the underlying structural issues and integrate the concerns of all generations. To this end, governments can engage youth in finding solutions to the crisis and promote age-diversity in state institutions. Furthermore, effective responses to the crisis need to build on reliable age-disaggregated evidence in order to address the various layers of inequalities among youth from different socio-economic backgrounds, ethnicities and gender. In addition, new investments into youth policy and services across the MENA region should be complemented by efforts to strengthen co-ordination across government and with civil society, to better monitor and evaluate measures and policies, and to engage youth on an equal footing.

 Education

As a response to the crisis, many countries around the world closed schools to halt the spread of the virus. According to data from UNESCO, the peak in school closures was registered at the beginning of April 2020, when around 1.6 billion learners were affected across 194 countries, accounting for more than 90% of total enrolled learners (UNESCO, 2020). Education policy makers, school principals and teachers had to find alternatives to face-to-face instruction in order to guarantee children’s right to education86 An OECD-Harvard Graduate School of Education Survey87 found that half of learners in primary and secondary schools faced school closures equivalent to at least 2 months of instruction. Schools in some MENA countries are yet to re-open. During this time, distance-learning solutions such as online classrooms, TV and radio broadcasts (such as in Morocco), and computer-assisted learning were implemented to an unprecedented scale to connect teachers and learners. In Egypt, the Ministry of Education and Technical Education launched in March a new study portal (https://study.ekb.eg/), an offshoot of the existing Egyptian Knowledge Bank (EKB),that would provide all students from K-12 access to all their lessons via interactive videos, games and presentations. Some countries and schools prioritised core curriculum essential for learner progression and examinations over cognitive, social and emotional competencies during this time.

The precise impact of school closures on students’ learning (“learning loss”) is yet to be assessed and will differ by subject, age and other factors, but it will be worst for learners from disadvantaged backgrounds. Recent estimates88 suggest large learning losses and economic impacts associated with the current crisis, considering that a typical learner could have lost one-third of a school year of learning during the crisis. They estimated that this would reduce learners’ lifetime incomes by about 3%, and lower a typical country’s GDP by an average of 1.5% over the remainder of the century.

Countries need to prepare school systems for re-opening, while expanding and improving delivery systems for remote and blended learning. This can prepare systems for potential “second waves” and strengthen performance and resilience for the long run. Several steps can be taken to manage the risks and trade-offs of re-opening schools, including physical distancing measures, establishing hygiene protocols, revising personnel and attendance policies, and investing in staff training on appropriate measures to cope with the virus. Drawing on lessons learnt from remote learning in the first half of 2020, education systems should not only aim to ensure access to remote resources for disadvantaged learners, but strengthen engagement between schools and parents in order to improve information and guidance to parents on effective practices for supporting their children’s learning. Investing in the continued development of young learners’ digital citizenship skills – competences, attributes and behaviours to participate safely, effectively, critically and responsibly in the digital world – remains essential to the success of online learning89.

Targeting support to disadvantaged learners will be essential, to help them recover lost learning and remain engaged in learning for the long term. Governments will need to understand and address the effects of disrupted learning across different age groups, subjects and, most importantly, different groups of learners (especially disadvantaged learners with little or no access to technology, with special needs, from low socio-economic status households, and/or with limited language skills such as migrants, asylum seekers and refugees). Perhaps more importantly, policy should focus on keeping disadvantaged learners engaged and motivated, and minimising drop-outs. The impact of COVID-19 on youth’s education has likely exacerbated educational inequalities as the adjustment to e-learning opportunities has been particularly difficult for youth without easy access to internet, without a personal computer, or without a quiet space at home.

Countries will likely need to sustain and deepen teacher professional development to underpin support for disadvantaged learners and online and blended learning. Teachers need support to incorporate technology effectively into their teaching practices and methods. Supporting teachers’ training about the use of digital resources for pedagogical practice and promoting teaching practices adapted to this context is key to ensure that ICT is leveraged effectively.

 Fragility and refugees

With the spread of the COVID-19 pandemic, humanitarian and conflict-affected areas are at particular risk. The MENA region has experienced a dramatic flow of refugees and internally displaced persons over the last decade, with Jordan and Lebanon hosting among the highest number of refugees per capita worldwide. Jordan is home to 750,000 UNHCR-registered refugees, predominantly from Syria, while Lebanon hosts approximately 1.7 million refugees, including 1.5 million from Syria (as of November 2019). The situation for refugees is different in Jordan and Lebanon in terms of access to health and possibilities to obtain work permits. Many refugees live in densely populated camps or poorer urban areas with poorer health, water, sanitation and hygiene facilities. Preventive measures in these locations, such as washing hands regularly, social distancing and self-quarantine, are of paramount importance but difficult to implement. In conflict-affected areas, where health systems are already fragile and medical resources are scarce, refugees lack adequate access to both detection mechanisms and medical care, making it difficult to assess the prevalence of the pandemic.

Finding ways to integrate migrants and refugees, regardless of their formal status, in national plans for tackling the virus and in social safety nets programmes is key to prevent the pandemic from spreading in refugee camps and in refugee hosting areas, and ensure that the consequences of the pandemic are mitigated. This would also have positive implications to prepare for future crises. Country practices include:

• The Lebanese Ministry for Social Affairs unveiled early March a preventive plan elaborated in coordination with representatives from NGOs and international organisations to prevent the spread of the virus in areas hosting refugees. The plan involves awareness campaigns targeted at refugees and provision of disinfection equipment in camps.

• In Jordan, the government, in coordination with UNHCR, has put in place measures to ensure continued access to national health services for refugees, including the referral of suspected cases to quarantine sites, and the provision of requisite treatment. Temperature screening has been implemented at the entrance of two major refugee camps, electricity provision has been enhanced and the supermarkets are running extended hours to facilitate social distancing. In-kind aid distributions are offered through JHCO (Jordanian Hashemite Charity Organisation), including to refugees.

• International organisations have also mobilised to help the most fragile countries in the region in strengthening their capacity to respond to the crisis. In particular, the World Bank announced a USD 26.9 million grant to support Yemen’s efforts to contain the outbreak, the bulk of which will finance the procurement of medical equipment, rehabilitation of health facilities and emergency medical staff training, and a USD 100 million project to support the Government of Jordan’s efforts in addressing education challenges resulting from the pandemic. In addition, the EU has approved close to 240 million EUR to strengthen resilience in neighbouring countries hosting Syrian refugees in light of the coronavirus pandemic.

Despite these efforts, a number of challenges remain, both from the health and socio-economic perspectives. While to this day no major outbreaks have been reported in refugee camps across the region, the lack of or limited testing capacity in areas with a high concentration of refugees has raised concerns regarding the possibility of hidden COVID-19 outbreaks. In Syria, Human Rights Watch estimated that official figures do not match the reality of cases on the ground, while UN Resident Coordinator and Humanitarian Coordinator in Syria Imran Riza said that more than 200 United Nations staff members have been infected as of early September. In the meantime, the contamination rate in Libya is the highest of all North African countries. This risk is compounded by the limited capacity of health systems in the region, which may lead to refugees being deprioritised in the health response. However, it is critical that national health systems take into account the testing and treatment of refugees.

The outbreak is putting a severe strain on refugees’ economic security. The vast majority of refugees, in particular women, work in the informal sector, and more specifically in jobs where they earn their income on a daily basis. Severe restrictions preventing refugees from working raise important concerns as to their ability to continue providing for their basic needs, whereas refugees working in certain sectors particularly exposed, such as farming, might be even more at risk. Prolonged confinement measures risk exacerbating poverty among refugees. This poses significant challenges in countries such as Lebanon, where the World Bank estimates that approximately one third of refugees lived in poverty prior to the outbreak.

On the other hand, the outbreak of the pandemic may also severely impact the process of refugee relocation, which is part of the asylum-seeking process. Border closures and travel restrictions are affecting the right to asylum as all resettlement procedures are currently suspended and forcing people to return to situations where they fear persecution or torture, violating the principle of non-refoulement. UN High Commissioner for Refugees recently voiced this concern, stating that while governments may put in place measures such as testing people seeking international protection upon entry and/or putting them in quarantine, such measures may not result in denying them an effective opportunity to seek asylum or result in refoulement.

Moreover, in a region where currently some 50 million people are undernourished, governments will need to ensure a swift response to limit a further increase in food insecurity in the region that could result from the economic consequences of the COVID-19 pandemic. This risk will be exacerbated if disruptions in global food supplies due to the pandemic lead to food shortages and price hikes in MENA countries which are highly dependent on food imports.