Beirut, 14 April 2022--The war in Ukraine, which has been rocking Europe and the world since 24 February, will likely have severe socioeconomic repercussions across the Arab region, particularly in low- and middle-income countries that import energy and food and face high debt burdens. About 3.7 million people are expected to join the ranks of the poor in 2023 and their total number in the Arab region will reach an all-time record of about 126 million. This is one of several projected impacts highlighted in a new policy brief issued today by the United Nations Economic and Social Commission for Western Asia (ESCWA), the Food and Agriculture Organization (FAO), the UN Environment Programme (UNEP) and the World Food Programme (WFP), titled “Impacts of the war in Ukraine on the Arab region”.
According to the brief, Arab economies are likely to lose $11 billion in 2022 and $16.9 billion in 2023. Arab middle-income countries would lose 2.3% of their expected GDP in 2022, while Arab least developed countries would suffer a loss of 0.6%. Only energy-exporting countries will see an increase in GDP of about 0.7% due to increased demand for and rising prices of energy. Fiscal deficits are likely to increase in the range of 2 to 6 percentage points across oil-importing low- and middle-income countries over what they have budgeted for 2022, with middle-income countries facing an increase in debt service of about $500 million.
With both countries being important sources of grain and vegetable oil imports, the war has given rise to food security concerns. Grain and oil supply to the region has decreased significantly due supply-chain disruptions and sanctions, causing rises in the prices of food and essential staples. For example, overall food prices have risen by an estimated 17% in Egypt; cereal prices have risen by up to 80% in the Sudan; and sugar prices have increased by up to 27% in the Syrian Arab Republic. The war is also jeopardizing delivery of aid by humanitarian organizations, putting millions of refugees and displaced persons in the Arab region at risk of hunger.
“There is an urgent need to maintain or increase, in certain cases, social protection measures, particularly those providing food and food subsidies to the poorest and most vulnerable households,” affirmed ESCWA Executive Secretary Rola Dashti. “Countries should also explore immediate alternative sources for food imports impacted by the war and enforce consumer protection measures to prevent unjustified food price increases,” she continued.
On the energy level, Arab energy-importing countries are witnessing the twin impacts of high prices of energy and imported goods, which threaten energy security, damage the balance of trade and squeeze government budgets. Some countries have raised energy prices, such as Morocco in which prices of diesel soared by 15% and gasoline by 33%, and Lebanon, which raised the prices of gasoline by 4% and diesel by 13% in the week of 21 to 25 March 2022. On the other hand, Arab energy-exporting countries have started witnessing significant windfalls, which are likely to continue if sanctions on the Russian Federation extend to the energy sector and are maintained in the medium to long term. Such revenues can be invested in strengthening sovereign wealth funds.
“Just as COVID-19 accelerated digital transformation, the war in Ukraine will trigger a supply-chain transformation, albeit at a slower pace, where old economic alliances and old trading routes will be reconfigured. This situation provides a scope for enhancing intra-Arab regional trade,” concluded Dashti.
The brief recommends to lower trade barriers and customs procedures and fees to facilitate trade in food, grains and staples among Arab countries, and advocates for the creation of an Arab food security emergency fund to tackle this crisis and future ones.
One of five United Nations regional commissions, ESCWA supports inclusive and sustainable economic and social development in Arab States, and works on enhancing regional integration.
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