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IHS Markit assesses that total real GDP in the MENA region
contracted by 6.6% in 2020, and although we expect overall GDP
growth to return in 2021, the growth is likely to be highly uneven
across the region. Only smaller, wealthier MENA states have secured
sufficient quantities of COVID-19 vaccine through advance purchase
agreements (APAs) to provide total coverage of their populations in
their vaccination programs (Israel, Qatar, and Kuwait have
announced APAs to cover 130%, 100%, and 67% of their respective
populations). Larger states such as Egypt and Turkey will also most
likely eventually rely on local manufacturing, either of a domestic
vaccine or via licensing arrangements, to build on their APAs.
These trends, effectively, will see MENA states divide into
three tiers according to the success of their vaccination programs.
A first tier of smaller, wealthier countries with centralized
governments, such as Israel and states of the Gulf Cooperation
Council (except Saudi Arabia), will likely be able to vaccinate
most, if not all, of their populations and largely lift
restrictions on their economies, particularly on the hospitality
and tourism sectors and international travel, by the end of 2021.
This is most likely to be a priority for those states where tourism
and international travel represent significant proportions of the
economy.
Economic reopening will be highly dependent on sufficient access
to large enough quantities of vaccines. IHS Markit expects that, in
many cases, states in this tier will secure vaccine supplies by
both paying high premiums to pharmaceutical companies, as well as
governments agreeing to share inoculation data with vaccine
manufacturers - aiding global rollout strategies and increasing the
efficiency of future research and development.
A second tier of vaccine states - Algeria, Egypt, Iran, Morocco,
Tunisia, and Turkey - is likely to be held back in implementing a
rapid vaccine rollout and a more rapid subsequent economic recovery
because of having much larger populations than first-tier countries
and the logistical difficulties of securing sufficient quantities
of vaccine, infrastructure weaknesses, and political instability
preventing or obstructing distribution. Such second-tier states
without highly centralized and efficient healthcare systems are
more likely to opt for limited vaccination programs with the
intention of inoculating the most-vulnerable, old and sick
demographics, avoiding further lockdowns and insisting that the
majority of the younger population is able to continue to work,
with or without vaccination. This will likely mean that localized
containment measures, including curfews and limited opening hours
for retail, are likely to be in place until late 2021-22, impeding
a return to rapid economic recovery, but avoiding full shutdowns
across sectors that are major employers, such as the manufacturing,
textile, and agricultural sectors.
A final tier of countries will include those most weakened by
the impact of sustained political instability, extremely low
governance capacities, civil violence, and international sanctions,
comprising Iraq, Lebanon, Libya, Syria, and Yemen. In these states,
vaccine rollouts to any significant extent are unlikely to take
place until well into 2022-23. It is likely that access to vaccines
will be impeded by financing difficulties and the administration of
any vaccination programs will be hampered by minimal infrastructure
and the threat of ongoing violence, including for any international
aid organizations.
All MENA states likely to be highly dependent on
securing access to external sources of vaccine until at least
second half of 2021, before domestic manufacturing is
achievable
Only a few MENA states have been involved in vaccine research
and development (R&D) and, although a wider group of states
potentially has domestic manufacturing capabilities at the start of
2021, MENA countries remain heavily reliant on external vaccine
suppliers. In response, MENA countries have become open to
accessing COVID-19 vaccines from diverse sources to balance the
risk of supply shortages and delays. For instance, Chinese
pharmaceutical companies have established a footprint in the MENA
region through offering clinical trials of vaccines in exchange for
advance or expedited access to vaccines. Egypt, Jordan, Morocco,
Saudi Arabia, and Turkey are all participating in vaccine trials of
products developed by Chinese pharmaceutical companies Sinopharm,
Sinovac, and CanSino. This is likely to facilitate the further
expansion of Chinese vaccine programs in MENA in the two- to
three-year outlook. In addition, the United Arab Emirates (UAE)
permitted domestic clinical trials to be conducted of the Russian
Sputnik V vaccine.
All the MENA states also signed up to participate in the World
Health Organization's COVID-19 Vaccine Access (COVAX) Facility,
which is intended as a multilateral body to pool resources for
vaccine procurement and subsequent distribution, reflecting the
acknowledgement among most MENA states that their national domestic
efforts are likely to be insufficient for a totally effective
vaccination program. Bahrain, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Libya, Oman, Qatar, and Saudi Arabia have all agreed down
payments for the COVAX Facility, which would, in theory, guarantee
vaccines at discounted prices for up 20% of their populations by
the end of 2021. Algeria, Egypt, Mauritania, Morocco, Syria,
Tunisia, the Palestinian Authority controlling the West Bank and
Gaza, and Yemen all qualify to be in the World Bank's group of
lower middle-income countries for Gavi-COVAX Advance Market
Commitment, meaning that they would qualify for supplies of
donor-funded vaccines for end-2021 - also for 20% of their
populations.
The MENA region has manufacturing capacity for vaccine
production, either of vaccines licensed from international
pharmaceutical companies or of domestically developed vaccines,
which will likely increase regional supply options later into 2021.
For instance, Turkey's domestic pharmaceutical sector is working on
the production of a domestically tested and produced vaccine, which
will likely support stock procured internationally, also preparing
Turkey to take advantage of future vaccine diplomacy outreach -
most likely in sub-Saharan Africa. In December 2020, Iran began the
human trial stage of a domestic vaccine, COVIran Barekat, produced
by Setad Ejraiye Farmane Hazrate Emam (Setad; Headquarters for
Executing the Order of the Imam), a parastatal under the direct
control of Supreme Leader Ali Khamenei. In addition, the Razi
Vaccine and Serum Research Institute is starting human trials of
another vaccine, Razi COV-Pars. Meanwhile, Egypt has approved the
regulatory framework for production of China's Sinovac vaccine,
while Algeria, Israel, and Morocco all have extensive domestic
pharmaceutical sectors.
Mass protests increasingly likely for MENA states with
incomplete political transitions through 2021, reflecting
frustrations with government and slow vaccine rollout
discontent
Disruptive protests against failing or transitional political
systems took place in Algeria, Iraq, Lebanon, and Tunisia in 2020
and these are likely to continue and grow in frequency in 2021.
Most of the civilian populations are likely to be extremely
unwilling to comply with any further imposition of restrictions on
movement or the economy. If these countries' governments attempt to
impose such containment measures while not providing sufficient
state financial support or wide-ranging vaccination programs over
the first half or 2021, the likelihood of nation-wide protests will
increase significantly. For MENA states where the informal economy
accounts for a large proportion of the workforce, such as Egypt,
Jordan, and Morocco, prolonged economic lockdown measures or
curfews are likely to galvanize protesters, particularly as
previous state support funds are likely to be depleted.
Likewise, there will be a high risk of social unrest for
governments perceived to be mismanaging vaccine rollouts due to
already diminished civic infrastructure and weakened state
finances; for instance, potentially in Algeria, Iraq, Lebanon, and
Tunisia. Failures to ensure appropriate vaccine rollouts will
become fodder for further political infighting, contributing to
increasing unrest risks and, in some instances, increasing the
likelihood of governments being removed or stepping down. Of these,
Algeria, Lebanon, and Tunisia, with already existing protest
movements, which saw setbacks in 2020 because of the COVID-19
pandemic, are likely to be the most vulnerable to a change of
government.
MENA states weakened by ongoing civil violence will
likely be limited in ability to secure adequate vaccine supply and
delivery, driving regional viral spread and potentially
mutations
COVID-19 data for conflict zones in the region - Iraq, Lebanon,
Libya, Syria, and Yemen - remain scarce, but years of political
instability, weak governance capacity, and especially economic
sanctions will restrict governments' ability to secure adequate
vaccines for their populations. Although Iraq, Lebanon and Libya
have all made commitments to the COVAX Facility, this would
guarantee coverage for 20% of their populations by end-2021. Syria
and Yemen additionally qualify for donor-funded doses of vaccine
through the Gavi-COVAX Advance Market Commitment, but deliveries of
these are likely to face delay because of vaccine production and
distribution limitations, as well as COVAX's difficulties in
reaching its USD6.8-billion fundraising target.
Even with some vaccine supply secured, administering vaccination
campaigns in conflict zones will face unique logistical challenges.
Without a declaration of widespread ceasefires or amnesties to halt
conflict temporarily and allow for wider vaccine distributions and
testing regimes to be put in place, it is almost certain that the
COVID-19 pandemic will persist. With highly porous borders
facilitating the movement of people, both militants and refugees, a
lack of effective pandemic management, especially as conflicts
likely intensify in spring and summer 2021 (such as in Yemen), will
open the door for any new virus mutations to spread beyond conflict
borders into the wider MENA region.
Non-state regional actors are likely to capitalize on
gaps in vaccination campaigns, to escalate violence and consolidate
territorial gains
In Iraq and Syria, the Islamic State and other jihadist groups
will probably try to exploit the economic damage already caused by
the COVID-19 pandemic and government failures intensified by the
need to prioritize a mass-vaccination program. Continued government
inability to secure vaccines, and the likely inadequacy of cooling
and medical infrastructure in the hot summer months, will
facilitate an increasing mortality rate and will probably serve to
aid recruitment by militant groups. The Islamic State's activity is
likely to increase in the lead up to Ramadan, running from 12 April
to 12 May in 2021, and continue into summer. The Islamic State will
also likely seek to disrupt Iraqi elections scheduled for October
2021.
Governments without full control of territory, such as in Syria
and Yemen, are also likely to see non-state actor groups leverage
access to populations in exchange for territorial recognition.
Ansar Allah (the Houthi movement), for example, has almost full
control of northern Yemen and is unlikely to accept any compromise
agreement to allow vaccination access that does not include the
recognition of its territorial gains. Instead, IHS Markit assesses
that it is likely to push to expand further the territory under its
control. The movement has exploited previous ceasefire agreements
to regroup and is likely to consider the reduced US support for the
Saudi-led coalition as a new opportunity to escalate fighting with
Yemeni forces and intensify targeting of Saudi territory.
Posted 16 March 2021 by Emre Caliskan, Senior Research Analyst, Economics & Country Risk, IHS Markit and
Firas Modad, Director Country Risk – Middle East and North Africa and
Jack A. Kennedy, Senior Analyst, Country Risk – Middle East and North Africa, IHS Markit and