COVID-19 vaccines to boost MENA economies, GCC states to rebound fast
The roll-out of COVID-19 vaccines and easing of containment measures will boost all the MENA economies in 2021, although this will be quicker in the Gulf countries which have greater access to vaccines and will be also be supported by a rebound in the oil market, according to London-based Capital Economics.
Economic recoveries started in the middle of this year and the recent positive news on COVID-19 vaccines has brightened the near-term outlook. The Gulf countries, as well as Egypt, appear to be better placed to secure access to vaccines through direct purchases from pharmaceutical companies, Capital Economics said in a report.
"In some cases, such as Saudi Arabia and the UAE, vaccination programmes have already started and this should pave the way for virus containment measures to be lifted in the first half of 2021. In contrast, other parts of the region look set to lean heavily on the multilateral COVAX facility to access vaccines. Distribution is likely to be slower than in countries with direct pre-orders," said, Jason Tuvey, Senior Emerging Markets Economist at Capital Economics.
Once virus containment measures are lifted, those economies that have been suffering heavily with COVID-19 outbreaks (mainly those in North Africa) will enjoy the largest “vaccine bounce”. In addition, those where sectors that are vulnerable to social distancing make up a larger share of output will also be major beneficiaries – Dubai stands out. There will also be indirect benefits through stronger external demand, an improvement in global risk appetite and higher oil prices (more below), the report said.
MENA economies are likely to suffer a longer-lasting legacy from this crisis compared with most other parts of the world. Governments across the MENA have provided little direct fiscal support so far, which is likely to have resulted in higher company liquidations and unemployment, as well as a rise in bad loans on banks’ balance sheets. "This will hold back demand. We expect all MENA economies will still be below their pre-virus growth paths by the end of 2022," Tuvey said.
