Economics in the Time of COVID-19
The ability to contain the virus depends on the strength of the public health systems
of the MENA countries. WHO ranks most MENA countries relatively high among the
world’s 191 health systems – with a few exceptions, such as Yemen (ranked 120th)
and Djibouti (ranked 157th) (Tandon et al. 2000). However, some MENA countries
might face difficulties in fighting the spread of the virus. Wars in Syria and Yemen
will almost certainly impede the proper functioning of the health systems in the two
countries. According to Abdinasir Abubakar of WHO’s Regional Office for the Eastern
Mediterranean, the US embargo on Iran may hurt Iran’s ability to buy the technology
required to produce essential equipment and medicine.^5
Oil prices
Because of their exposure to oil and gas exports, a decline in the prices of petroleum-
related products is expected to be the most significant channel through which effects
of the COVID-19 are felt in MENA countries. Since the discovery of the new virus
and infections in China at the beginning of 2020, oil prices have declined sharply. The
price of Brent oil dropped from $68.90 a barrel on 1 January to $50.5 a barrel as of 28
February (see Figure 1). Crude oil futures tumbled by about $20 a barrel during January
and February in anticipation of the negative impact on oil demand from COVID-19 (see
Figure 2).
Although other factors might have contributed to this drop, COVID-19 was probably
the most important factor, largely because of the significant drop in demand from China
as authorities shuttered production facilities as part of their efforts to contain the spread
of the virus. According to the Oil Market Report for February from the International
Energy Agency (IEA), China’s oil demand currently accounts for 14% of global
demand, and China’s growth in oil demand currently accounts for more than 75% of
the global growth in demand (International Energy Agency 2020). In addition, with an
increasingly important role in the global economy, any setbacks to the Chinese economy
are expected to have significant negative spillovers to the global economy (Arezki and
Yang 2018). In addition, the global fear and uncertainty regarding the spread of virus
will likely hurt investment decisions in China and in other countries, which further
lowers oil prices. The IEA expects global demand for oil to fall by 435,000 barrels per
day year-on-year in the first quarter of 2020 – the first quarterly contraction in more
than a decade. The global demand for all of 2020 is also expected to fall by 365,000
barrels per day – the worst performance of demand since 2011. The risk posed by the