Pandemic Kicks Some MENA Economies When They’re Already Down

As COVID-19 cases surge, health restrictions exacerbate financial troubles     

The Middle East and North Africa (MENA) region is being hit harder than most by the economic effects of the coronavirus, the majority of these countries having already been on shaky ground before the virus arrived, analysts say.

Now, with new cases surging in September and October, many have reinstated lockdowns and other health restrictions, putting an additional damper on the economy.

Ragui Assaad, an expert on Middle East economics and labor at the University of Minnesota’s Humphrey School of Public Affairs, talked to The Media Line about the MENA region’s vulnerability.

“The main difference is in the fragility of their economic situations prior to the COVID crisis,” he said. “COVID exacerbated what were already serious economic problems that were leading to street protests and political instability.”

COVID exacerbated what were already serious economic problems that were leading to street protests and political instability

He cites Jordan as an example of an economy that was expanding at a snail’s space.

Jordan is also a regional hotspot for the pandemic. Its Health Ministry recorded 2,054 new cases on Tuesday for a population of just under 10 million.

Government statistics there show that the gross domestic product (GDP) shrank by 3.6% in the second quarter of 2020, the country’s worst in more than two decades, according to the Union of Arab Chambers, a group of Arab businesspeople. If the situation continues, the government anticipates a 5.5% decline in the overall economy this year.

Caroline Krafft, assistant professor of economics specializing in the MENA area at St. Catherine University in Minnesota, says that weekend lockdowns begun last week will hurt Jordan in the near future.

“The weekend lockdowns are depressing business activity,” she told The Media Line.

The weekend lockdowns are depressing business activity

“The Jordan Chamber of Commerce said the… lockdown this past weekend caused a 40% decline in sales,” she said. “Businesses in hard-hit industries, such as restaurants, were already struggling, and knowing that there will be indefinite weekend lockdowns will further curtail business.”

Less income for business means less tax revenue for the government.

Krafft adds that lockdowns mean “hiring will be reduced, which is especially challenging for Jordan’s large population of youth, which, prior to the pandemic, already faced some of the world’s highest unemployment rates.”

Whether the impact is felt over the long term depends on whether the restrictions succeed in containing the coronavirus, she said.

“If the lockdowns allow children to return to school or improve the economy in the longer term, the tradeoffs may be worth it,” she explained.

According to Assaad, the longer the lockdown, the greater the economic harm.

“It would make things even worse than they are now. This could result in further political instability and serious economic hardship, especially for vulnerable populations such as Syrian refugees,” he stated.

As in Jordan, the economy in Tunisia was not doing well before the pandemic. Tunisia is fragile politically and is the only country that become a democracy in the so-called Arab Spring of 2011.  

“The Tunisian economy, already in a shambles, was dealt a knockout punch in the beginning of the year by the pandemic’s spread,” Lotfi Saibi, chief executive officer and general manager of the Tunis-based 4D Leadership House consulting and research bureau, told The Media Line.

The Tunisian economy, already in a shambles, was dealt a knockout punch in the beginning of the year by the pandemic’s spread

“Already burdened by local and international debt, [it] had the tiniest of slivers of hope in making a recovery right after the elections of a new president and a new parliament,” he said.

“Not only were those hopes dashed by the early incompetence and lack of public-policy management, but they practically disappeared once COVID-19 appeared as a major threat,” he continued. “Unemployment, inflation, bankruptcy, and the deficit are all indicators that have gained in momentum due to the coronavirus’s impact.”

Tunisia was previously seen as a model for dealing with the pandemic, yet the latest data from the Johns Hopkins Coronavirus Resource Center at Johns Hopkins University shows it had a record 4,360 new cases on Friday.

Saibi says that so far this year, Tunisia’s economy has declined by 8%, and if things continue in this fashion, its GDP will be down 12% for the year.

“A change of government due to corruption allegations that left the country in standstill mode for nearly two months has not helped matters either,” he noted.

“There is practically zero preparedness-planning culture in Tunisian institutions,” he went on.

There is practically zero preparedness-planning culture in Tunisian institutions

“There is no experience in dealing with a major pandemic such as COVID. There is a fear of making tough policy decisions. It was easier dealing with the first wave – by shutting down the country and imposing curfews. Such options are off the table this time, mainly because of the severe economic impact they left behind,” he stated.

Saibi says that tourism, which accounts for 12% of Tunisia’s GDP, is the sector suffering the most damage. The North African nation has had only 2 million tourists in 2020, compared with more than 9 million in 2019. 

Its textile industry, largely reliant on exports, was the second-hardest hit,” he notes. Demand abroad has declined because of falling income, and the sector has declined by 30%.

“An economy that was extremely shaky coming into 2020 is now on the verge of complete collapse,” he said. “The pandemic has only accelerated the inevitable.”

An economy that was extremely shaky coming into 2020 is now on the verge of complete collapse. The pandemic has only accelerated the inevitable