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Ukraine war raises risks for Mideast, World Bank warns

DUBAI: The war in Ukraine has “multiplied risks” for the Middle East and North Africa’s poorer countries by raising food and energy prices, the World Bank said Thursday, warning of potential social unrest. In its latest update to its MENA growth forecast, the development lender said inflationary pressures set off by COVID-19 “are likely to be exacerbated” by Russia’s invasion.

“The threat of COVID-19 variants remains and the war in Ukraine has multiplied risks, particularly for the poor,” the World Bank’s MENA vice president, Ferid Belhaj, said in the report, titled “Reality Check”. World Bank president David Malpass said this week that the Russian war on Ukraine has started a chain reaction in the global economy, pushing energy and food prices higher, exacerbating debt concerns and potentially worsening poverty and hunger.

“Rising food prices may have far-reaching effects beyond increasing food insecurity,” said the report, adding: “Historically in MENA, increases in bread prices have… contributed to increased social unrest and conflict. “This link between food prices, conflict and low growth poses a serious concern for the humanitarian crisis in fragile, conflict and violence-affected states in MENA,” it said.

Ukraine is a key source of grain, while Russia is a major producer of energy and fertilizer needed for agriculture. The MENA region is heavily dependent on wheat supplies from both countries. According to the report, inflation in oil-rich Gulf countries is expected to reach 3.0 percent this year compared to 1.2 percent in 2021, and will rise to 3.7 percent in oil-importing countries from 1.4 percent last year.

Growth ‘insufficient’

“For some oil importers, food subsidies would be hard to maintain due to limited resources,” while “rising oil prices could delay reforms”, the report said. Despite that, the World Bank forecasts that economic growth in the region will be 5.2 percent in 2022, the fastest rate since 2016. “The region as a whole is buoyed by oil” and is doing “much better” than any other in the world, lead economist for the MENA region Daniel Lederman told AFP in an interview.

However, the expected growth is “insufficient and uneven”. “Insufficient because a large number of economies in the MENA region will still be poor in terms of their GDP per capita relative to where they were in 2019 in the eve of the pandemic,” he said. And “uneven because the faster (recovering) economies for 2022 are expected to be oil exporters, but oil importers are expected to suffer”.

Oil-exporting economies are expected to grow 5.4 percent on the back of the recovery from the pandemic, the expected increase in oil output and high oil prices. But oil importers are expected to expand by a much lower 4.0 percent, the report said, warning that 11 out of 17 MENA economies may not recover to pre-pandemic levels by the end of this year. “When the price of energy and food rises, it hurts the poorest and the most vulnerable,” Lederman said.

Nuclear arms

Former Russian president Dmitry Medvedev warned Thursday that Russia would deploy nuclear weapons close to the Baltic States and Scandinavia if Finland or Sweden decide to join NATO. Medvedev, deputy chairman of Russia’s Security Council and president from 2008 to 2012, wrote on Telegram that if the countries joined, this would more than double Russia’s land border with NATO members.

“Naturally, we will have to reinforce these borders,” he said. “In this case, it would not be possible to talk any more about the Baltic non-nuclear status. The balance has to be restored,” he said, indicating that Russia would be entitled to deploy nuclear weapons in the region. The former president said Russia would “seriously reinforce its group of ground forces and air defenses and deploy significant naval forces in the Gulf of Finland.”

Kremlin spokesman Dmitry Peskov, asked about the comments by journalists, said that “this has been talked about many times” and President Vladimir Putin has issued an order on “reinforcing our western flank” due to NATO’s growing military potential. Asked if this reinforcement would include nuclear weapons, Peskov said: “I can’t say… There will be a whole list of measures, necessary steps. This will be covered at a separate meeting by the president.”

Moscow’s military actions in Ukraine have sparked a dramatic U-turn in public and political opinion in both Finland and Sweden over long-held policies of military non-alignment. Finland said this week it will decide whether to apply for NATO membership within weeks and Sweden is also discussing membership. – AFP

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