Continuing Mideast Conflict Severely Impacts MENA Economies, World Bank Reports

Kuwait city: The ongoing conflict in the Middle East and North Africa (MENA) region is exerting a devastating impact on economic growth, with significant disparities among different countries, the World Bank Group revealed in its October 2024 MENA Economic Update. The report highlights that while some Gulf Cooperation Council (GCC) countries see modest growth, developing nations in the region face economic deceleration and heightened uncertainties. According to Kuwait News Agency, the World Bank's report, titled "Growth in the Middle East and North Africa," describes the conflict as having widespread repercussions, affecting not just the immediate areas but also the broader region. The report emphasizes that peace is crucial for development, noting that real GDP growth in MENA is projected at 2.2 percent in 2024, up from 1.8 percent in 2023. However, this increase masks the significant slowdown expected in developing MENA countries, where growth is set to decelerate from 3.2 percent to 2.1 percent in oil-imp orting countries and from 3.2 percent to 2.7 percent in oil-exporting countries. The ongoing conflict, particularly centered in Gaza, has had dire economic consequences. Gaza's economy nearly halted with an 86 percent contraction in Q2 2024, while the West Bank saw a contraction of 23 percent in the same period. The Palestinian Authority is facing a financing gap of USD 1.86 billion in 2024, more than double the previous year, exacerbated by increased deductions by Israel on clearance revenue transfers and reduced domestic tax receipts. Neighboring economies have also suffered, with tourism and fiscal revenues declining sharply. For instance, Jordan experienced a 6.6 percent decrease in tourist arrivals through August 2024, and Egypt saw a 62 percent drop in Suez Canal revenues in the first half of 2024 compared to the latter half of 2023. The report also notes a significant untapped potential in the region, suggesting that better allocation of talent in the labor market and leveraging strategic locations could boost innovation and sustain growth. However, disparities such as talent misallocation and stagnant female labor force participation rates, which if addressed, could increase per capita income by 51 percent in typical MENA countries.