World Bank: Economic growth in Middle East hit by wars

The World Bank MENA Quarterly Economic Brief has analyzed the far-reaching impact of war on human and physical capital, and explored how economic fortunes can be turned around if there is peace.

In 2016, about 87 million people from the four MENA countries directly affected by war—Iraq, Libya, Syria, and Yemen—represent about one third of the region’s population. In these countries, every aspect of people’s lives—home, clinic, school, work, food, water—has been affected by the intensity of the fighting in these separate conflicts.

The statistics are startling: about 13.5 million people need humanitarian aid in Syria; in Yemen, 21.1 million; in Libya, 2.4 million; and in Iraq, 8.2 million.

In Yemen, 80% of the country’s population—20 million out of 24 million people—is now considered poor, an increase of 30% since April 2015, when fighting escalated.

In Syria and Iraq, per capita income is 23% and 28% less respectively, or roughly a quarter, of what it might have been had conflict not broken out, with the direct effects of war accounting for 14% and 16% drops in per capita GDP respectively.

Political tension between Saudi Arabia and Iran casts a shadow across the region.

Yet, five years ago, everyone hoped that new governments would move towards more equitable, inclusive growth, creating more jobs for MENA’s legions of young unemployed. Instead, the reverse has happened, with the region estimated to have lost as much as US$35 billion (measured in 2007 prices) in lost output or foregone growth because of the Syrian crisis—the equivalent to Syria’s GDP in 2007.

MENA’s wars have affected countries neighboring them. Turkey, Lebanon, Jordan, and Egypt, already constrained economically, have been under tremendous budgetary pressure. The World Bank estimates that the influx of more than 630,000 Syrian refugees in Jordan has cost it more than US$2.5 billion a year. This amounts to 6% of GDP, and one-fourth of the government’s annual revenues.

The conflicts in Syria have affected not just neighboring governments but their citizens, too, with average per capita incomes estimated to be 1.5% lower now than they would have been (without Syria’s turmoil) for many Turks, Egyptians, and Jordanians, and by 1.1% for many Lebanese.

Unemployment among Syrian refugees, especially women, remains high and, when there is work, pay is low. About 92% of Syrian refugees in Lebanon are without job contracts; more than half are paid weekly or by the day. Syria’s war has displaced half its population—more than 12 million people—both internally and externally. A total of 6.5 million more have been internally displaced in Iraq and Yemen. In Libya, about 435,000 people have been displaced, among them 300,000 children.

Although farmers and businessmen in Lebanon and Turkey may have been able to profit from cheap labor, local workers have lost out. Nor has Lebanon’s economy benefited from cheap oil prices because of the pressure of hosting more than 1 million Syrian refugees, with the Bank estimating a fall in real GDP growth of 2.9 percentage points each year from 2012–14, pushing more than 170,000 more Lebanese into poverty, and doubling the country’s unemployment rate to above 20%.