Economies in the Middle East and North Africa continue to atrophy as conflict in the region intensifies and oil prices sharply decrease.
The plummeting price of oil has forced many nations to dig deep into their reserves to maintain a semblance of status quo. In 2015, oil-producing countries in the Middle East brought in $275 billion dollars less than they were able to in 2014.
“The spreading and deepening of conflict in the region are first and foremost a humanitarian tragedy to conflict countries and the neighboring regions,” Adnan Mazarei, deputy director of the Middle East and Central Asia department at the International Monetary Fund (IMF), told Gulf News Journal. “In addition to the destruction of physical and social infrastructure, the countries directly affected have in some cases seen their economies contract massively.”
Adding to destabilization of many economies in the region are civil wars in Iraq, Syria, Yemen, Libya and Somalia, which have devastated the environment and infrastructure.
As many as 9.2 million refugees, excluding Palestinian refugees, have fled the Middle East and North Africa due to conflict and the rise of violence from non-state organizations like ISIS, according to the United Nations Refugee Agency. That’s more than 60 percent of the world’s total refugees.
Syria is the biggest example of such devastation. The IMF estimates Syria’s GDP has shrunk by 40 to 60 percent since unrest began.
Before recent conflict, Yemen saw half of its population under the poverty line and unemployment at 18 percent – 40 percent among youth. Currently, in Yemen, more than half the population lacks basic health care and more than 75 percent needs humanitarian assistance, according to the IMF.
“In addition to the impact on the countries directly affected by conflicts, there have been heightened risks for regional stability and adverse socio-economic, political and security implications for neighboring countries such as Jordan and Lebanon,” Mazarei told Gulf News Journal. “Those countries, along with Iraq, Iran and Turkey are hosting a large number of refugees and are facing significant economic, fiscal and social pressures.”
In addition to the substantial humanitarian and economic cost this turmoil has on refugees, host countries are also vulnerable to considerable impact. Large inflows of refugees can negatively effect infrastructure, disrupt trade flows, lower investment and negatively impact tourism.
“There are also large fiscal costs: for example, large refugee inflows have also increased pressure on food, labor, real estate markets and access to public infrastructure, which could disproportionately affect each country’s poorest,” Mazarei said. “These developments can strain host countries’ social fabric and give rise to political instability, particularly where governments already face challenges of significant social exclusion and high unemployment, notably among the youth.”
Host countries in the Middle East and North Africa face threats to their housing market, health care, public school and national security, Mazarei said.
Jordan and Lebanon spend about one percent of their GDPs supporting refugees, according to Mazarei.
In Europe, however, more stable budgets have been able to absorb some of the challenges brought on by refugees, and in some cases their financial situations respond positively.
According to the European Union, three million refugees are expected to arrive by the end of 2016. Refugees are expected to stimulate annual GDP in European countries from 0.2 to 0.5 percent, according to European economic think tank Bruegel.