ESCWA: $42bn decline expected in Arab countries’ GDP due to Covid-19

A report issued by the United Nations Economic and Social Commission for Western Asia (ESCWA) has predicted that the gross domestic product (GDP) of Arab countries will fall by $42 billion, and that 1.7 million jobs will be lost due to the spread of the coronavirus. The organisation also indicates that the increasing number of infections is exhausting the health sector in the region.

This was stated in the policy brief published by ESCWA on its official website, which presented the first economic assessment of the expected losses that will be caused by the spread of the virus in the region.

The report reveals that Arab states’ GDP is expected to decline by at least $42 billion in 2020, adding that: “The figure could be higher, with the compounding effect of low oil prices and the dramatic slowdown of economies due to the closure of public institutions and private sector enterprises starting mid-March. The longer the lockdown, the higher the cost on the economies of the region.”

According to the report, increasing the period of total shut-down in the Arab region, as one of the measures to prevent the spread of the virus, will increase the economic losses in the region.

READ: Can Lebanon afford a coronavirus shut-down? 

The report suggests that: “More than 1.7 million jobs could be lost in 2020, with the unemployment rate increasing by 1.2 percentage points. Unlike in the aftermath of the global 2008 financial crisis, employment is expected to be affected across all sectors.”

ESCWA’s evaluation shows that the outbreak of the coronavirus resulted in a drop in oil prices: “Which has cost the region nearly $11 billion in net oil revenues between January and mid-March 2020. The significant halt in trade and global transport is expected to cause a further increase of that figure in the coming weeks.”

During the same period, companies in the region incurred huge losses in market capital, amounting to $420 billion, equivalent to 8 per cent of their total market capital, according to the report.

Commenting on the topic, ESCWA Executive Secretary Rola Dashti confirmed: “We are under a global health threat which may alter the world as we know it. Its impact on people’s lives and families, on our children’s education, on our health systems and on our planet are yet to be revealed. But we can start to assess our economic losses and find ways to mitigate them.”

Dashti continued: “Policy solutions and swift actions are needed to trigger recovery, based on a comprehensive and integrative approach that leaves no one behind.”

ESCWA recommends that governments take concerted and coordinated measures to provide support at macro and micro levels, so as to improve social protection mechanisms, especially for poor and vulnerable groups.

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The organisation also advised the governments in the region to adopt active financial policies to support companies, including the provision of tax exemptions, ensuring the payment of wages and extending deadlines for debt payments, in addition to supporting small and medium-sized enterprises.

Meanwhile, ESCWA called on the multilateral financial institutions to support the middle and low income economies in the region, in order to face the current financial pressures.

As of Thursday morning, the coronavirus has infected nearly 220,000 people in 176 countries and territories. More than 8,970 people died, most of whom are from China, Italy, Iran, Spain, South Korea, Germany, France and the US.

The worldwide spread of the virus has forced many countries to close their borders, suspend flights, cancel many events and prevent public gatherings, including weekly Friday and congregational prayers.