As the Arab world recovers, at various rates, from the effects of the coronavirus pandemic with surprisingly low fatalities, attention is now shifting to dealing with the socioeconomic impact of months of lockdown resulting in some cases in total shutdown of the economy.
According to a recent study by the Economic and Social Commission for Western Asia (ESCWA) preliminary estimates suggest that the region could lose $42 billion of gross domestic product (GDP) as a result of the health related lockdown.
The study also indicates that between January and mid-March 2020, businesses across the region have registered massive losses in market capital, in the order of $420 billion. That constitutes loss of total regional wealth equivalent to 8 per cent.
Central banks were active in some countries in an attempt to mitigate the effects of the lockdown on the availability of liquidity in the market while some governments adjusted their fiscal policies to support small and medium businesses
Furthermore, the ESCWA study expects the unemployment rate to increase by 1.2 percentage point, which translates to the loss of about 1.7 million jobs across the region. The steep decline in oil prices has cost the region $11 billion in net oil revenues from January to mid-March 2020.
Various sectors have been especially affected such as the service sector, which includes travel and tourism, which is expected to suffer the most.
Some countries have responded early to the economic consequences of the pandemic including the UAE which announced a $27 billion stimulus plan to boost the economy, while Saudi Arabia introduced a $13 billion stimulus package to support businesses and extend finance to small and medium enterprises.
Central banks were active in some countries in an attempt to mitigate the effects of the lockdown on the availability of liquidity in the market while some governments adjusted their fiscal policies to support small and medium businesses.
But the economic effects of the lockdown, the fall in oil prices and the long-term damage to certain sectors will be felt across the globe. In a globalised economy the reverberations of slow or negative growth will affect all.
Aside from sharing knowledge and experience in fighting the pandemic and coordinating health measures, Arab countries must look at the medium and long term socioeconomic impact of the pandemic on the region.
Many countries are unable to launch multi-billion-dollar stimulus plans to rescue their economies and must rely on regional and international creditors for help.
Others will have to adjust to new socioeconomic realities that include restructuring their foreign labour markets while speeding up the nationalisation process of local labour.
Recovery of travel and tourism
Aside from adjusting fiscal policies, diverting investments to boost the health sector and passing generous incentives to speed up the recovery of certain sectors like travel and tourism, governments will have to review existing social safety nets to protect those who are affected the most by the forced closure of the economy.
No country can come up with all answers and responses on its own. There will be an urgent need to share information and exchange expertise while looking beyond the survival of an individual country in the wider region.
The effects of the pandemic lockdown have been described as the biggest global challenge since World War II. The world’s biggest and most buoyant economies have seen their economies shrink in the first and second quarters of this year.
The US is now officially in a recession and the question now is how long will that recession last? The Arab world will be affected in many ways by an almost imminent world recession. It is now that regional governments must examine how the post-coronavirus world will look like.
Governments can do so much on their own. Without active and positive participation and partnership by the private sector, a new vision for the future will be sorely lacking. Investments will have to be reviewed and redirected both domestically and regionally.
A regional approach to new economic and social challenges will have to be adopted. Closing the gates and going into isolation will be counterproductive. The crisis, as tough and unprecedented as it is, also provides opportunities for reform.
But some countries will have to adopt hard decisions to restructure their economies. Bulging public sectors cannot be supported anymore as sources of government revenue change in nature.
Investment in the health sector must become a priority while strengthening social safety networks is now a priority to ensure societal stability.
In addition there is now a need to redevelop regional financial institutions and funds that could step in to review debt referrals for countries in financial stress while enabling medium and long term financing of viable projects through grants and interest free loans.
The Arab world will be forced to change and governments can either embrace that change or resist it. The old ways of doing business will simply not do anymore.
As much as individual countries need to come up with their own solutions, the region as a whole needs a new approach in order to mitigate the socioeconomic effects of the pandemic while preparing for a post-coronavirus world.
Osama Al Sharif is a journalist and political commentator based in Amman.