DUBAI: The World Bank yesterday predicted a moderate economic recovery for the Middle East and North Africa (MENA) in 2021, while highlighting the many challenges still posed by the coronavirus pandemic. The Washington-based institution said the pandemic had seen the region's economies shrink by about 5.0 percent in 2020, inflicting heavy job losses and a sharp increase in the number of people living below the poverty line of less than $5.50 a day.

"Among oil exporters, growth is expected to recover to 1.8 percent this year, supported by normalizing oil demand, the scheduled easing of the OPEC+ oil production cuts, policy support, and the gradual phasing out of domestic pandemic-related restrictions," it said in a report. Saudi Arabia, the largest economy in the Arab world, will benefit from the resumption of public projects, which had been postponed at the beginning of the crisis, and the recovery of demand after a sharp rise in VAT, it said, tipping a 2.0 percent expansion.

Growth should also accelerate to 1.5 percent in Iran thanks to the recovery of domestic consumption and tourism and the mitigation of the effects of COVID-19, they added. Growth in other countries in the region is expected to reach 3.2 percent in 2021 due to the easing of travel restrictions and a slow recovery of domestic demand. However, it is expected to reach only 2.7 percent in Egypt, the most populous country in the region, following the "collapse" of various sectors, notably tourism and gas extraction.

The World Bank warned that regional economies faced a variety of hurdles as they try to get back on their feet. "The recovery is contingent on containment of the pandemic, stabilizing oil prices, no further escalation of geopolitical tensions, and the assumption of a vaccine rollout in the second half of the year," it said.

The World Bank downgraded its outlook for the global economy, and warned the situation could erode further if COVID-19 infections rise further or vaccine rollouts are delayed. After a contraction of 4.3 percent in 2020, the world economy is projected to grow by 4.0 percent this year, two-tenths lower than previously forecast, as more than half the countries were downgraded in the semi-annual Global Economic Prospects report. But the report warns that the outlook remains "highly uncertain," and GDP growth could be as low as 1.6 percent if the downside risks materialize. - AFP