10/31/2023, 11.53
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Winds of war between Israel and Hamas blow on the (economic) crisis in the Middle East

Added to concerns over the civilian victims of the conflict in the Strip are fears for regional economies. Oil prices and repercussions in the energy sector are being watched. A sharp drop in GDP is expected for the entire MENA region. World Bank: the impact on employment in an area where 300 million young people will be knocking on the door of the labour market by 2050.

Milan (AsiaNews) - The war between Israel and Hamas in Gaza, with its already devastating toll of lives and the risk of the conflict spreading outside the Strip throughout the Middle East and beyond, worries the international community.

However, if the deaths - particularly among civilians, many of whom are children - represent the first element of attention and concern, there is also an economic factor to take into consideration.

The repercussions on regional and global finances of the military escalation in response to the terrorist attack - which hit the population and the military, followed by massive bombings and the army's ground attack on Gaza - are already evident and lead to downward estimates of growth. This is a further alarm bell, in a context of profound uncertainty.

“The war between Israel and Hamas could deal a serious blow to global economic development”, said World Bank President Ajay Banga at a conference in Saudi Arabia, adding that “we find ourselves in a very dangerous situation”.

Economic repercussions

On a global scale, energy is the most important issue in the short term. Oil prices, already high at the time of the attack on Israel, are liable to further increases linked to fears of supply interruptions, especially if the crisis involves Iran or reduces Iraqi production.

Shocks on the supply of crude oil would have an impact on the economic activity of energy-importing countries and on the world economy in general: according to estimates by the International Monetary Fund (IMF), a 10% increase could weigh on global growth by 0. 15 points and increase inflation to the level of 0.4%.

It must be said that the Israeli economy currently appears solid and has demonstrated notable resistance to periods of war, as well as boasting a net foreign credit position exceeding 30% of GDP and foreign exchange reserves exceeding 200 billion dollars.

But other factors weigh on the general figure, including the impact of general mobilization, the reduction in tourism and the effect of growing security concerns on public spending, investments and capital. The shekel, weakened in recent months by the Supreme Court controversy, has depreciated by about 5% since the beginning of October and the Bank of Israel has taken measures to stabilize markets.

And other countries find themselves in a weaker situation: Lebanon is mired in an extremely serious financial crisis, with a decline in GDP of more than 50% since 2018. Jordan has a high foreign debt (net liabilities exceed 110% of GDP) and the persistence of conflicts could have repercussions on internal stability and tourism, an important source of foreign currency. Egypt also depends on tourist flows for hard currency earnings and faces a challenging macroeconomic outlook.

Winds of war on the crisis

The winds of war raging in Gaza add to a general crisis situation in the Middle East and North Africa (Mena) which was already present before 7 October, with a sharp decline in growth for the current year.

This is certified by a report published earlier this month by the World Bank, according to which GDP will go from 6% in 2022 to 1.9% in 2023 with a greater decline for oil-producing and exporting nations.

This critical situation risks having repercussions on the labor market, with a marked increase in unemployment in many sectors and a double incidence compared to other areas or emerging economies.

The institute also predicts that real GDP growth in the current year will be around 1%, again sharply down compared to 7.3% in 2022 due to reduced oil production and the significant reduction in crude oil prices.

In the weeks preceding the conflict in Gaza, the tightening of global financial conditions and high inflation were already weighing on the indices, representing a significant limit to economic activity in the oil-importing countries in the Middle East and North Africa. Here, growth is expected to be in the order of 3.6% in 2023, down from 4.9% in 2022.

World Bank experts also predict that there will be critical issues throughout the region, with the data relating to the growth of per capita income going from 4.3% in 2022 to a paltry 0.4% this year. By the end of 2023, only eight of the 15 MENA economies could return to pre-Covid-19 pandemic levels of GDP per capita (real, which involves adjustments that include inflation levels).

The effects on unemployment

“If the region grows slowly, how will the 300 million young people who will knock on the door of the job market by 2050 find work with dignity?” asks Ferid Belhaj, MENA vice-president of the World Bank.

The issue of employment weighs heavily because a further lack of work and opportunities could trigger new protests, fuel violence or accelerate the migration phenomenon with global consequences.

“Without adequate political reforms, we could inadvertently worsen the structural challenges - continues the senior official - that the region's labor markets face” and for this reason he recalls that “the time for reforms is now”.

Fears and concerns shared by the institute's chief economist for the Middle East and North Africa Roberta Gatti, according to whom the region "is unique" compared to the rest of the world precisely in the "reaction of unemployment to economic downturns". The figure “is almost double,” she warns, when compared to “other emerging markets and developing economies.”

Five million people in the Middle East and Africa have lost their jobs due to economic shocks since 2020: pandemic, Russian war in Ukraine to the current crisis in the Holy Land to name a few. Overlaid on this, she explains, are the effects of increasingly high inflation, the repercussions of which are already visible in the rise in consumer prices, even for basic necessities.

"For these five million people - she warns - it will be more difficult to find a job in the future", they will have to rely on casual or low-skilled jobs and "they will not be able to support their families".

Still on the subject of unemployment, experts report a reversal of trend in the female labor market in Saudi Arabia where there is a growth in female quotas which, despite the reforms, remains well below the global average.

This also emerges from data from the Arab Gulf States Institute (Agsiw), an organization based in Washington, in the last six years the female participation rate has doubled, going from 17.5% to 35%. In a context of high income and education, female employment increased by 45% and the unemployment rate went from 33% to just under 16%.

However, scholars warn, much remains to be done to reach standards that are now the norm elsewhere in the world, while leadership roles remain the prerogative of men.

“Despite progress, the rate of female participation in the workforce is still well below the global average, which is just over 50%,” warns Tim Callen of Agsiw. And the figure on female unemployment, he concludes, is "three times higher than that of men".


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