The Middle East’s Challenges Aren’t Just Combatting the Virus
April 28, 2020
The Bible asserts that Egypt suffered 10 plagues during the Exodus story, and Covid-19 may well have shaped up to be the eleventh. Early news of sustained infections on Nile cruise boats in February raised fears that thousands of undiagnosed cases were floating around in Egypt. If infections were already widespread, whatever Egypt did to encourage social distancing seemed likely to fail because of a late start, poor compliance, crowded housing, and limited health care capacity.
Whether one takes at face value Egypt’s reports of 5,042 cases and 359 deaths, it seems very likely that Egypt hasn’t fared so poorly. By comparison, the state of Maryland, which was hit later and has been relatively aggressive in enforcing social distancing, has had 20,113 cases and 929 deaths. Even if one argues that Maryland’s more aggressive approach to diagnosing the disease has elevated the state’s toll, that doesn’t quite explain the difference. After all, Maryland has about one-sixteenth of the population of Egypt.
A month ago, Egypt was thought to be facing both a public health catastrophe and an economic one. While there is still much we don’t know about Covid-19, the public health catastrophe seems not to have hit. Still, Egypt’s government—and all Middle Eastern governments—will have to deal with the daunting economic challenges of Covid-19 and the potentially daunting political challenges that might come from it.
Nowhere in the Middle East has the disease followed the course it did in Iran. There, the government was slow to admit it had a problem, and it delayed efforts to distance people until after parliamentary elections could be held. Infections skyrocketed. Iran’s parliament issued a report on April 14 suggesting that even the startling official figures—currently at more than 90,000 infections and more than 5,000 deaths—may be only half the true number of cases.
Yet, the widespread infections in Iran, mirroring the disease’s broad and rapid spread in countries such as France, Spain, Italy, and the United Kingdom, have not been replicated in other Middle Eastern states. Lebanon has 717 cases and 24 deaths, and Jordan has 449 cases and only 8 deaths. Yet, the secondary effects of Covid-19 are rocking the region and will continue to do so because of the collapse in global oil demand and the sharp drop in travel for leisure, pilgrimage, and inter-regional transit.
Economists often bemoan the relatively low level of intra-regional trade in the Middle East. Members of the European Union trade heavily amongst themselves, spread among services, manufactured goods, and foodstuffs. The North American Free Trade Agreement helped boost already robust trade in North America, helping spawn entire industries that trade intermediate goods across borders. Most Middle Eastern countries export little, and those that do often export the same thing. They mostly trade outside the region, exporting energy to Asia or agricultural goods to Europe.
Even so, the entire Middle East region is deeply tied to the economics of oil, and oil is hurting. The pain of low oil prices cannot be contained. Millions of Arabs work in the Gulf and send money to families back home. Billions of dollars in Gulf capital is invested throughout the region, from Morocco to Iraq. Billions more flow to poorer governments in the region from wealthier ones, bolstering foreign reserves and underwriting social services. With low levels of taxation throughout the Middle East, this flow of money is vital—from oil-consuming states to oil-producing states and then on to labor producing states. As oil prices have plunged, the whole cycle has broken down.
A slower global economy has not only dropped oil prices. A decrease in global shipping demand, combined with low energy prices, makes circumnavigating Africa more economical, and that cuts the amount of sea freight going through the Suez Canal. Egypt normally takes in more than $5 billion/year in Canal tolls, which is an important source of foreign exchange for the government. The number seems certain to be lower this year.
Tourism is an unappreciated driver of regional growth. Iraq, Iran, Israel, and Saudi Arabia all have holy sites that draw millions of pilgrims per year. And Jordan, Egypt, Tunisia, Lebanon, Morocco, and the UAE all have extraordinarily active leisure tourism markets. Both kinds of tourism have largely ended for the foreseeable future.
Egypt’s tourism industry is especially important for the economy. It accounts for about 12 percent of Egypt’s GDP and more than 9 percent of employment, if indirect employment is included. Egypt’s tourism comes from many places—Western economies, Asia, and the Middle East—but the Covid-19 crisis will block all of it.
While Egypt is especially battered by the economic effects of the disease, it is in no way unique. Lebanon’s economy already had a banking and currency crisis before Covid-19; Jordan’s economy was still reeling from the influx of refugees on top of lingering damage from the 2008 global financial crisis. In Algeria, Tunisia, and elsewhere, difficult problems have all gotten more so.
Even though Covid-19 has not swept the Middle East as feared, the economic impacts of the pandemic will pose severe challenges. When the region was shaken by the Arab uprisings almost a decade ago, treasuries were flush, and assistance was abundant. Covid-19 has knocked out some of the resilience the region showed then—not because of what it has done inside the region, but what the disease has done to the rest of the world. The Middle East may prove resistant to the disease, but it will be susceptible to its side effects. Addressing the region’s economic and political ills, and not just merely its medical ones, will become an urgent challenge in the years ahead.
Jon B. Alterman is a senior vice president, holds the Zbigniew Brzezinski Chair in Global Security and Geostrategy, and is director of the Middle East Program at the Center for Strategic and International Studies in Washington, D.C.
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