ESCWA warns of decline in foreign investment in MENA due to COVID-19

The United Nations Economic and Social Commission for Western Asia (ESCWA) yesterday warned of an unprecedented and historic decline in Foreign Direct Investment (FDI) in the Arab region due to the coronavirus pandemic.

ESCWA said in a policy brief that the coronavirus pandemic will have a devastating effect on the Arab region which is expected to lose 45 per cent of FDI inflows in 2020.

The coronavirus is spreading at varying rates in the Arab region. While the number of confirmed infections is rapidly increasing in countries like Saudi Arabia, Mauritania has recently announced the recovery of its latest case of infection.

The commission added that “the alarming decline is even bigger than the 2011 drop in FDI, which had been caused by political unrest in several Arab countries, aggravating concerns about financing businesses in the region.”

According to the policy brief, fiscal revenues in the Arab region are expected to decrease by at least $20 billion in 2020, with lower imports weighing on customs revenues and other indirect taxes dropping as well due to reduced consumption.

READ: Will the Coronavirus Change the World? On Gramsci’s ‘Interregnum’ and Zizek’s Ethnocentric Philosophy 

ESCWA called on the World Trade Organisation to “facilitate the flow of essential medication to address the health crisis in developing countries, including through collective action to allow non-commercial usage of a COVID-19 vaccine when developed.”

ESCWA Executive Secretary Rola Dashti called on Arab governments to “support commercial projects to reduce layoffs and keep essential operations running”.

“They could adopt a policy mix including postponement of social contribution payments, extension of tax exemptions, provision of wage subsidies, and temporary suspension of loan repayments,” she added.

Several Arab countries like Bahrain and Kuwait took a number of measures to support small and medium enterprises in particular.

According to less optimistic scenarios in terms of trade, the brief expected the region to lose as much as $88 billion in exports.

Coronavirus is affecting the world’s economy – Cartoon [Sabaaneh/MiddleEastMonitor]