REGIONAL REPORT
“ If the region grows slowly , how will the 300 million young people who will be knocking at the door of the labour market by 2050 find jobs with dignity ?” added Ferid Belhaj , World Bank Vice President for the MENA region . “ Without proper policy reforms , we could inadvertently worsen the enduring structural challenges faced by MENA ’ s labour markets as far as the eye can see . The time for reform is now .”
While the World Bank has not yet completed a full assessment of the economic impact of the recent natural disasters in Libya and Morocco , it forecasts that the macroeconomic effects could be modest as the potential disruptions are likely to be short-lived . Yet , empirical evidence on the effect of disasters in developing countries suggests a reduction in growth at the onset and an increase in indebtedness in the mediumterm to finance the reconstruction . GDP growth tends to bounce back quickly after such events .
MENA labour markets
The second part of the World Bank report focuses on the human side of three macroeconomic shocks : COVID-19 , large currency devaluations and negative terms-of-trade shocks , by comparing labour markets in MENA with labour markets in other emerging market and developing economies ( EMDEs ) during economic contractions and expansions .
The report finds that MENA labour markets differ from those in other EMDEs in one critical dimension : during contractions , the response of unemployment in MENA is almost twice the response in other EMDEs . Between 2020 and 2022 , global economic shocks hit the region ’ s employment levels particularly hard . Findings from the report suggest that this macroeconomic turmoil could have pushed an additional 5.1- million people out of work — beyond the already high unemployment rates before the pandemic . If MENA had the same unemployment response of other EMDEs , the shocks of 2020-22 would have resulted in 2.1 million fewer unemployed workers in MENA , it said .
“ In times of economic downturn , governments face a trade-off between more unemployment and lower real wages ,” said Roberta Gatti , World Bank Chief Economist for the MENA region . “ While neither outcome is desirable , the policy implications are clear : flexible real wages coupled with well-targeted cash transfers is the superior approach to reduce the long-term economic costs on the families in MENA borne by macroeconomic shocks .”
Even temporary macroeconomic shocks can leave permanent scars on the hard-working population of MENA . Job losses can affect workers ’ employment prospects , earnings potential and overall career trajectories in the long term .
Conflict impact on commodity markets
The current conflict in the Middle East could bring ‘ dual shock ’ to global commodity markets , commented the World Bank on 30 October 2023 .
Although the global economy is in a much better position than it was in the 1970s to cope with a major oil price shock , an escalation of the latest conflict in the Middle East — which comes on top of disruptions caused by the Russian invasion of Ukraine — could push global commodity markets into uncharted waters , according to the World Bank ’ s latest ‘ Commodity Markets Outlook ’.
The report provides a preliminary assessment of the potential near-term implications of the conflict for commodity markets . It finds that the effects should be limited if the conflict doesn ’ t widen . Under the Bank ’ s baseline forecast , oil prices are expected to average US $ 90 per barrel in the current quarter before declining to an average of US $ 81 a barrel next year as global economic growth slows . Overall commodity prices are projected to fall 4.1 % next year . Prices of agricultural commodities are expected to decline next year as supplies rise . Prices of base metals are also projected to drop 5 % in 2024 . Commodity prices are expected to stabilise in 2025 .
“ The conflict ’ s effects on global commodity markets have been limited so far . Overall , oil prices have risen about 6 % since the start of the conflict . Prices of agricultural commodities , most metals and other commodities have barely budged . However , the outlook for commodity prices would darken quickly if the conflict were to escalate ,” commented the World Bank .
The report outlines what might happen under three risk scenarios based on historical experience since the 1970s . The effects would depend upon the degree of disruption to oil supplies . In a “ small disruption ” scenario , the global oil supply would be reduced by 500,000 to two million barrels per day — roughly equivalent to the reduction seen during the Libyan civil war in 2011 . Under this scenario , the
The current conflict in the Middle East could bring ‘ dual shock ’ to global commodity markets
Images : Unsplash oil price would initially increase between 3 % and 13 % relative to the average for the current quarter — to a range of US $ 93 to US $ 102 per barrel .
In a “ medium disruption ” scenario — roughly equivalent to the Iraq war in 2003 — the global oil supply would be curtailed by three million to five million barrels per day . According to the report , that would drive oil prices up by 21 % to 35 % initially — to between US $ 109 and US $ 121 a barrel . In a “ large disruption ” scenario — comparable to the Arab oil embargo in 1973 — the global oil supply would shrink by six million to eight million barrels per day . That would drive prices up by 56 % to 75 % initially — to between US $ 140 and US $ 157 per barrel , said the report .
“ The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia ’ s war with Ukraine ,” said Indermit Gill , the World Bank ’ s Chief Economist and Senior Vice President for Development Economics . “ That had disruptive effects on the global economy that persist to this day . Policymakers will need to be vigilant . If the conflict were to escalate , the global economy would face a dual energy
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