In 2023, it’s anticipated that the Middle East and North Africa’s (MENA) economies will experience a dramatic decline in growth. According to the most recent edition of the World Bank MENA Economic Update (MEU), the region’s gross domestic product (GDP) is predicted to decline to 1.9% in 2023 from 6% in 2022 as a result of oil production cuts occurring amid low oil prices, challenging global economic conditions, and rising inflation.
The paper, “Balancing Act: Jobs and Wages in the Middle East and North Africa When Crises Hit,” claims that the Gulf Cooperation Council (GCC) oil-exporting nations will experience a greater decrease in growth than the rest of MENA this year.
In these nations, real GDP growth is anticipated to fall to 1% in 2023 from 7.3% in 2022 as a result of decreased oil production and lower oil prices. Growth in emerging oil exporting nations is anticipated to slow from 4.3% in 2022 to 2.4% in 2023.
The tightening of international financial conditions and high inflation continue to restrain economic activity in the MENA oil-importing nations. The country is expected to grow by 3.6% in 2023 as opposed to 4.9% in 2022.
The “tale of two MENAs” from 2022, in which the region’s oil producers were developing considerably faster than the oil importers, comes to an end as a result of these findings.
Changes in per capita income are the best indicators of improvements in living. conditions. By this metric, regional growth is anticipated to decline from 4.3% in 2022 to 0.4% in 2023. Only eight of the 15 MENA economies will have their real GDP per capita back to pre-pandemic levels by the end of 2023.
Oil and natural gas are the main sources of energy for the MENA region. The area is home to approximately half of all known natural gas reserves and 53% of the world’s proven oil reserves.
According to a World Bank analysis, when economic shocks occur without causing inflation, unemployment becomes the main factor influencing labour market adjustment in the MENA region.
“How will the 300 million young people who will be knocking on the door of the labour market by 2050 find work with dignity if the region expands slowly?” Remarked Ferid Belhaj, Vice-President of the MENA area at the World Bank.
“Without appropriate policy changes, we risk unintentionally escalating the long-standing structural issues that MENA’s labour markets are already grappling with. Now is the time for change,” the official added further.
The World Bank anticipates that the macroeconomic consequences of the recent natural catastrophes in Libya and Morocco could be limited because any interruptions are likely to be transient, even though the World Bank has not yet finished a comprehensive evaluation of the economic impact.
However, actual research on the impact of disasters in developing nations points to a decline in development at first and a rise in debt over the next several years to pay for the reconstruction. After such occurrences, GDP growth often recovers swiftly.
The second section of the report compares the labour markets in MENA with those in other emerging markets and developing economies (EMDEs) during economic contractions and expansions to examine the human impact of three macroeconomic shocks: COVID-19, significant currency devaluations, and negative terms-of-trade shocks.
According to the analysis, MENA labour markets are distinct from those in other EMDEs in one crucial way: during contractions, unemployment in MENA is nearly twice as high as it is in other EMDEs.
Global economic shocks particularly affect the region’s employment levels between 2020 and 2022. The report’s conclusions imply that in addition to the already high unemployment rates before the pandemic, an extra 5.1 million individuals may have lost their jobs as a result of this macroeconomic turbulence. MENA would have experienced the shocks of 2020–22 with 2.1 million fewer unemployed employees if it had the same unemployment response as other EMDEs.
Roberta Gatti, chief economist for the Middle East and North Africa at the World Bank, stated that during economic downturns, governments must choose between more unemployment and lower real earnings.
While neither result is ideal, the policy implications are unmistakable: flexible real wages combined with carefully targeted cash transfers are the best way to lessen the long-term economic costs of macroeconomic shocks for MENA families.
Even brief macroeconomic shocks can have a lasting impact on the tenacious people of MENA. Long-term job losses can have an impact on an individual’s employment opportunities, earning potential and overall career trajectories.