MENA: Economic recovery will be modest in 2021
Source: Middle East Insurance Review | Feb 2021
Economic activity in the MENA region is forecast to recover modestly to 2.1% in 2021, reflecting the lasting damage from the pandemic and low oil prices, the World Bank said in its January 2021 Global Economic Prospects.
The recovery is contingent on containment of the pandemic, stabilising oil prices, no further escalation of geopolitical tensions, and the assumption of a vaccine rollout in the second half of the year. The COVID-19 pandemic caused output losses in the region of an estimated 5% in 2020.
By 2022, after two years of expected recovery, output is still about 8% below the output projected prior to the pandemic, with a larger impact on oil importers than exporters.
Among oil exporters, growth is expected to recover to 1.8% this year, supported by normalising oil demand, the scheduled easing of the OPEC+ oil production cuts, policy support, and the gradual phasing out of domestic pandemic-related restrictions.
In Saudi Arabia, activity will be supported by a resumption of public capital investment projects postponed during the pandemic and a recovery of demand after the sharp rise of the VAT. Growth in Iran is expected to recover due to rebounds in domestic consumption and tourism and moderating disruptions from COVID-19.
Growth in oil importers is expected to rebound to 3.2% in 2021 as mobility restrictions are gradually eased and exports and domestic demand recover slowly. In Egypt, growth is expected to slow to 2.7% in fiscal year 2020/2021, amid a collapse in tourism, gas extractives and a slowdown in other key sectors such as manufacturing. Morocco is expected to rebound to 4.0% in 2021 as the country’s agricultural output recovers from drought and the government eases domestic lockdowns. M