COVID-19 and Arab economies

Facing the Middle East's perfect – corona-induced – storm

The COVID-19 pandemic has triggered a public-health emergency and a steep reduction in oil prices, which represents a perfect storm for the Middle East, where everything from salaries to subsidies are dependent on oil revenues. By Bassem Awadallah and Adeel Malik

As in the past, the oil-price shock will inevitably spill over to non-oil-producing countries through reductions in official aid transfers and lower worker remittances, further eroding the fiscal cushions needed to cope with COVID-19.

Worse, the pandemic has hit the region at a time when it was already reeling from multiple crises. The Syrian tragedy continues, civil wars have been raging in Libya and Yemen, and the "Arab street" has been re-mobilising. From Algeria and Sudan to Iraq and Lebanon, protesters are speaking out in unison against a development model that has produced only corruption and social instability.

The public’s perceptions are not unfounded. Though it is still characterised as a middle-income region, the Middle East has witnessed a worrying uptick in poverty and income inequality. A recent World Bank report shows that the share of the region’s people living in close proximity to violent conflicts increased from 6% to 20% between 2007 and 2017 – far exceeding the global average of 3%.

The region now accounts for 40% of the world’s displaced people. With the world’s highest youth-unemployment rate, its bloated public sectors were already becoming increasingly difficult to sustain. Whether Iraq can even pay its civil servants’ salaries next month remains to be seen. And it is not alone.

Search for common solutions

Coronavirus graffiti in the Gaza Strip exhorting people to stay at home (photo: picture-alliance/dpa/M. Ajjour)
Seeing the crisis as an opportunity: though there is a growing chorus calling for global efforts to deal with the pandemic, the first thing the Middle East needs is a targeted regional strategy. The Arab world should launch a new development model to address its increasingly interdependent socio-economic challenges

Now that COVID-19 is upon us, the Middle East faces an extraordinary challenge that will require an extraordinary response. Though there is a growing chorus calling for global efforts to deal with the pandemic, the first thing the Middle East needs is a targeted regional strategy. The crisis should be recognised as an opportunity to build a new political order for the region.

Now is the time for the Arab world to work toward common solutions, embrace a shared destiny and launch a new development model to address its increasingly interconnected socioeconomic challenges.

No reliance on the assistance of global powers

The post-World War II regional order had already reached its breaking point by the end of 2019. The United States is no longer the sole arbiter of Middle Eastern affairs, owing to its declining reliance on oil imports and its growing fatigue with external military engagements. And while Russia, the European Union and regional powers have shown an increasing willingness to intervene in the region, none has the resources or desire to fill America’s shoes.

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