2008 and 2009 was characterized by multiple economic crises - food, fuel and finance-, to which the Middle East and North Africa Economic Development Department at the World Bank (MNSED) responded by adapting its work program to emerging development needs and partners demands.
Food price increases had a profound impact in the Middle East and North Africa region (MENA) which is the world’s largest importer of grains and foodstuffs. In responding to the impact of price increases, the main focus was on the region’s poorest countries Djibouti and Yemen, as well as supporting Egypt where food subsidies play a critical role in the overall social safety net.
The increase in fuel prices brought huge windfall revenues to the oil exporting economies in MENA, which is home to the largest sovereign wealth funds. In contrast MENA’s non-oil exporting countries saw their current account deficits increase along with spending on subsidies causing major fiscal imbalances. As the international food and fuel prices retreated, these pressures have gradually eased.
The global financial crisis had an immediate and adverse impact on GCC countries, as bank credit had expanded very rapidly before the crisis and banks had become overextended and reliant on external funding from wholesale markets. The freezing of these markets combined with the drop in oil prices and the bursting of real estate bubbles resulted in a sharp contraction of credit and substantial decline in GDP growth -- from 6% in 2008 to 1% in 2009.
Crisis response shows up in the Department's lending figures
FY: Fiscal Year
IDA: International Development Association
IBRD: International Bank of Reconstruction and Development
By contrast, non-GCC countries were comparatively less affected, as credit growth was generally slower, banks were not overextended, and were not reliant on external funding. These countries were subject to second round effects through reduced exports, FDI, remittances and tourism revenues, but the decline in GDP growth was less pronounced, from about 6% in 2008 to about 3.5% in 2009. Overall, MENA has been one of the regions least affected by the crisis, with a regional GDP growth forecast of about 3 percent in 2009. The region, however, has missed out from the past decades of rapid growth that benefited many other developing regions and hence needs to accelerate growth rates to create jobs for the youth bulge.
MNSED has responded to the crisis mainly through focused advisory services, especially in Egypt, Jordan, Tunisia and Yemen, in addition to financial support, especially in Tunisia.