April 26, 2021

MENA

MENA: The two faces of Covid-19 in the region

BY Jon B. Alterman

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( 5 mins)
  • Compared to predictions of a year ago, the Middle East is in very good shape.
  • However, beneath a facade of near-normalcy is a troubling fact: the disparity between the countries that have done best in the face of COVID-19 and those that have done worst is large.
  • Covid-19 will hang over several states’ economic, political, and social development for many years to come.

It was not a given that the wealthiest states in the region would survive the pandemic better than most. Internationally, the plunge in global energy demand thrust oil prices downward, with no clear inflection point for recovery. Initial infection rates were relatively high, driven by nationals who defied early quarantine orders and very large foreign worker populations who lived in close quarters and sometimes had limited access to sanitation. Many of these states also rely heavily on travel—pilgrimage travel for Saudi Arabia, and transit tourism for the UAE and Qatar. Virtually overnight, the sector shut down. Much better, it seemed, to be in a place like Jordan, where daily infection rates stayed in the single digits through August. Serious quarantine efforts and an extraordinary public relief effort seemed to keep Jordan safe.

As fall turned to winter, however, the tide began to shift. Vaccines have made a large difference in places like the UAE. Although Abu Dhabi’s big bet on the Sinopharm vaccine seems misplaced given the vaccine’s disputed effectiveness, Dubai has aggressively inoculated its population with the Pfizer-BioNTech vaccine, and the overall rate of infections is falling. Bahrain has administered 70 doses per hundred people, and Qatar has administered 50; consequently, Bahrain’s infection curve is falling, and Qatar’s is flat. Saudi Arabia is lagging in part because of the size of its population and the size of the country, but it is catching up, and its curve is flattening, too.

While all these countries fear that Ramadan gatherings will turn into super-spreader events, the rapid pace of vaccinations offers hope that the worst is behind them. Meanwhile, the recovery of global oil prices means that the governments have ample fiscal space to boost the economy. It has been a difficult year for all of these countries, but not a catastrophic one.

Other countries are less lucky. Jordan saw its caseload spike in September, and the government basically threw in the towel on tight restrictions on movement. With a large informal sector, the task of keeping people paid and fed was too great a burden under harsh restrictions. Egypt, too, has largely opened up. Although there is much evidence that Egypt has systematically undercounted its caseload by a factor of ten or more, Egyptians largely go about their lives unrestricted. Meanwhile, vaccination is very slow—Jordan has administered about eight shots per hundred people, and Egypt fewer than one.

Both Jordan and Egypt have substantial tourist industries. While estimates vary widely, some argue that the direct and indirect impacts of tourism constitute more than ten percent of employment and as much as 20 percent of GDP in strong years. With vaccinations proceeding slowly in both places and relatively high infection rates persisting, it is hard to imagine how tourism will recover in the near term.

More broadly, neither country has the resources for an economic stimulus to compensate for Covid-19’s effects. Some assistance may arrive from the Gulf, especially with the prevailing higher oil prices. Still, both countries are unlikely to experience any economic rebound in the next year, and there are some signs of increasing political tension.

A bad mix

Some of the countries worst hit by the pandemic are those that can least afford it. The caseload in Iraq has been rising all spring, and vaccination levels remain below one shot per hundred people. Iraq’s economy contracted about 10 percent last year, pressured by the combination of Covid-19 effects and lower oil production at lower prices. The country continues to suffer from its own brand of dysfunctional internal politics, exacerbated by the proxy battles that neighbors spur in the country.

Neighboring Iran has been hit even harder, with an even higher Covid-19 caseload, further reduced oil revenues, and a punishing sanctions regime. It is early to predict the outcome of June’s elections. However, it is possible that conservative forces deeply skeptical of engagement with the West could triumph—perhaps riding on a wave of public apathy—spurring a new round of confrontation and greater volatility in oil markets. What seems unlikely is that Covid-19 will lead to a rise in skillful governance.

It gets worse from there. Lebanon is in a financial crisis, with about half of the population now in poverty, and Covid-19 has placed an enormous burden on an already shaky health care system. About 80 percent of Syria’s population is now poor, and COVID-19 is apparently rampaging through the entire country, whether controlled by the government or the opposition. Yemen remains on the brink of collapse in every way. A collapse in any of those places could ricochet around the Middle East.

The Middle East’s middle-income and poorer states have grown accustomed to support from their wealthier neighbors in times of distress. This time may be different, though. The Gulf states are focused on domestic recovery and investments to cope with the coming global energy transition. Regional recovery may not have the urgency it has had in the past, and if that is the case, the region could be on the brink of some tectonic shifts.

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