Farid Belhaj, Vice President of the World Bank for the Middle East and North Africa, said the organization was ready to help the countries of the region achieve the right balance between political and economic goals.
In an interview with Asharq Al-Awsat, Belhaj said that the World Bank was working to guarantee that trade agreements in the region do not fail.
This approach comes in parallel with a proposal to create a framework for coordinating trade integration mechanisms in the region that goes beyond reducing customs duties and paves the way towards integration into global value chains.
This can start with food security, healthcare systems, renewable energy and the knowledge economy, according to the World Bank vice-president.
The dual economic shocks of the coronavirus outbreak and the collapse of oil prices have affected all aspects of the economies of the Middle East and North Africa region, he said.
He noted that the World Bank’s new report, which was released recently, expected the region’s economies to contract by 5.2 percent in 2020 - 4.1 percentage-points lower than expected in April 2019 - and a 7.8 percentage-points decline from the future prospects mentioned in the October 2019 report.
In light of declining oil export revenues, the fall of other fiscal revenues, and the large expenditures required to face the pandemic, it is expected that in 2020 current account transactions and fiscal balances in the region will record a contraction between 4.8 and 10.1 percent of GDP respectively, which is below the economic outlook reported in the October 2019 report, Belhaj revealed.
Public debt is expected to register a significant increase in the next few years from about 45 percent of GDP in 2019 to 58 percent in 2022, he told Asharq Al-Awsat.
One of the most important factors of the region’s economic recovery will be represented by the countries’ ability to stop the spread of the virus, protect their people and provide them with the necessary care, he underlined.
Asked about the role of the World Bank in this regard, Belhaj said that the organization has provided nearly $700 million to the MENA region in emergency support to help meet the most urgent public health needs.
The Bank also supports individuals and helps countries expand the umbrella of social safety nets, including cash transfers for the most needy groups, as well as support for small businesses, he explained.
Belhaj emphasized the importance that countries of the region embark on implementing structural reforms to restore growth. The most effective way to achieve this goal is to encourage competition, adopt innovations in digital technology, and seek commercial integration, he told Asharq Al-Awsat.
The World Bank vice-president also said that adopting a new framework for regional integration will help stimulate economic recovery and longer-term sustainable development.
He noted that the report highlighted how poorly the region’s countries integrated - with each other and with the rest of the world - before the pandemic, and proposed a new framework for trade integration that goes beyond reducing tariffs.
Trade liberalization must be comprehensive and beneficial to all sectors, he underlined. Without improving the general business environment or encouraging the role of the private sector, the region will not reap the benefits of such liberalization.
Belhaj said the World Bank was ready to help the countries of the region strike the right balance between political and economic goals to ensure that trade agreements do not fail.
“We recommended a focus on regional trade in sectors such as food security, health care systems, renewable energy and the knowledge economy. The report proposes the creation of a common digital market in the region so that its countries can improve trade and digital interconnections with the wider markets in Africa and the Mediterranean region,” he stated.
In this context, he stressed that the African Free Trade Area agreement provided a great opportunity for the countries of the Middle East, North Africa and Sub-Saharan Africa to simplify and coordinate trade measures.
Asked how the coronavirus pandemic increased the suffering of the underprivileged in a region that was already facing tension and political difficulties, Belhaj said that the crisis caused huge economic losses and social pain.
“It is difficult to provide accurate estimates of income losses and subsequent increases in the number of poor. In the MENA region, unfortunately, we also face the challenge of lack of access to reliable survey data,” he remarked.
Citing recent estimates, Belhaj said that poverty increased by 12 million to 15 million people in 2020 alone, adding that the number could rise to over 23 million by the end of 2021.
Asked about his recommendations for the GCC countries to achieve a historic leap in development and improve economic growth, the World Bank senior official said: “Although the GCC countries have made important progress in terms of their development agendas, there are still many unresolved problems that must be addressed. Further diversification of economic activities and private sector-led growth will be essential, and will require strengthening labor market reforms and education in order to increase productivity rates and expand economic opportunities available to the labor force.”
On his assessment of the series of economic reforms recently initiated by Saudi Arabia, Belhaj said: “Significant progress has been achieved in the labor market, especially in terms of women employment and directing the educational system towards acquiring the required skills in the future. The implementation of the recently adopted National Employment Strategy will be an ideal way to consolidate progress towards these reforms.”
Belhaj underlined the importance of Saudi Vision 2030 in defining the Kingdom’s transformation goals.
“The vision has also placed great emphasis on intertwining issues and has established a structure to address them. It will be interesting to see how the rest of government agencies will determine their contribution to the successful implementation of the vision,” he remarked.