Regional co-op can boost Middle East economic recovery

15 March, 2021 12:00 AM printer

DUBAI: On February 19, G7 leaders agreed “to work together and with others to make 2021 a turning point for multilateralism”. A week later, G20 finance ministers and central bank governors echoed the call for joint action and strong policy co-operation.

International coordination has never been more important as the world continues to grapple with a global pandemic and the worst peacetime economic contraction since the Great Depression. The cornerstone of this global strategy is regional cooperation – a long-time call for the Middle East North Africa (Mena) region and now an opportunity of a lifetime, report agencies.

The prospect of ending the health crisis and accelerating the recovery hinges on wide access to efficient distribution of vaccines, as well as policies that support growth and mitigate economic scarring from the pandemic.

Within the Mena region, only a handful of countries have started vigorous vaccination campaigns (Gulf Co-operation Council (GCC) countries and a few others with production capacity, such as Morocco). Our latest forecasts suggest that countries with diversified vaccine providers could see higher 2021 growth on average by 0.3-0.4 percentage points compared to their October 2020 forecasts.

On the other hand, most countries in the region plan to rely primarily on the World Health Organisation’s (WHO) Covax vaccine sharing scheme. Those with more limited access to vaccines and/or hit harder by the second wave will have weaker outlooks and delayed recoveries. The fragile and conflict-affected states (FCS), in particular, could see their 2021 gross domestic product levels 6 per cent lower than in 2019.

Regional cooperation is thus essential to ensure equal and sufficient access to vaccines for all countries and is in the interest of both vaccine haves and vaccine have-nots as the virus knows no borders.

Countries that have secured surpluses and those with domestic vaccine production capacity (e.g., Morocco and the UAE) could ramp up production and accelerate distribution to those with insufficient supplies while countries with know-how should support others to facilitate storage and distribution.

This has already started: in the UAE, the Hope Consortium is providing logistics services to distribute 6 billion doses of vaccines worldwide during the first half of 2021, while the Vaccine Logistics Alliance is expected to support the delivery of 2 billion doses globally under the WHO’s Covax initiative, prioritising countries with low storage capacity.

Such cooperation needs to be generalised and further strengthened, with a priority to support FCS. A joint procurement arrangement like the EU initiative could also be considered as a cost-effective way to secure access to vaccines by a larger number of countries.

Co-operation is also critical to reduce economic divergence and accelerate recovery. Under the current policies, recovery in Mena Emerging Markets is projected to lag that of their peers elsewhere, with most countries not recouping their 2019 GDP levels until 2022.

Moreover, many of the region’s countries do not have the policy space to further support their economies – additional public spending could exacerbate debt sustainability concerns in several countries.

In this context, further regional cooperation and integration could provide an additional source of growth without pressuring fiscal positions.

Further economic integration among Maghreb countries, could create a regional market of almost 100 million people, make the region more attractive for foreign direct investment and increase the efficiency of resource allocation, according to a 2019 IMF study. Intraregional trade may double, contributing to higher employment and raising growth in each Maghreb country by 1 percentage point on average in the long term. With trade and tourism hit hard by the coronavirus, the potential benefits from further integration could be even higher.