Destins bouleversés : Bulletin d’information économique de la région MENA
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Destins bouleversés : Bulletin d’information économique de la région MENA
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La forte inflation et la hausse des prix alimentaires posent un défi aux économies du Moyen-Orient et d’Afrique du Nord (MENA), dont la croissance devrait ralentir en 2023. Regardez en replay le lancement officiel de la dernière édition du Bulletin d'information économique de la région MENA.
L’économiste en chef de la Banque mondiale pour le Moyen-Orient et l’Afrique du Nord a décrit les perspectives économiques de la région et l’impact de l’augmentation des prix des produits alimentaires, qui frappe de plein fouet les populations pauvres. Roberta Gatti a notamment expliqué comment même un renchérissement temporaire des denrées peut avoir des effets de longue durée sur plusieurs générations et avoir de graves conséquences sur le plan de l’éducation, de la santé et des revenus futurs.
Une table ronde réunissant des personnalités de premier plan a permis ensuite de partager diverses perspectives sur les conséquences de l’inflation et de l'insécurité alimentaire. Que fait la Banque mondiale pour lutter contre l'insécurité alimentaire ? Quelles sont les priorités de la Banque islamique de développement pour amortir les chocs des prix ? Que révèlent les enquêtes d’opinion menées récemment par le Middle East Institute sur la situation de la population de la région MENA face à l’inflation ? Vous le saurez en visionnant cet évènement, qui apporte un éclairage complet sur les effets délétères de l'insécurité alimentaire et ses répercussions de longue durée.
01:40 Principaux enseignements du rapport
- Roberta Gatti, Économiste en chef pour la Région Moyen-Orient et Afrique du Nord (MENA) de la Banque mondiale
28:59 Table ronde
- Roberta Gatti, Économiste en chef pour la Région Moyen-Orient et Afrique du Nord (MENA) de la Banque mondiale
- Ferid Belhaj, Vice-président, Moyen-Orient et Afrique du Nord
- Paul Salem, Président de l'Institut du Moyen-Orient (The Middle East Institute-MEI) aux États-Unis
- Muhammad Sulaiman Al Jasser, Président, Groupe de la Banque islamique de développement
- Modératrice: Karen Young, Senior Non-Resident Fellow, MEI; Senior Research Scholar, Center on Global Energy Policy, Columbia University
Good morning, good afternoon, and good evening. Welcome to the launch event for the World Bank's Middle East and North Africa Economic Update. My name is Karen Young and I'm a Senior Non-Resident Fellow at the Middle East Institute and founder of its program on economics and energy, as well as a Senior Research Scholar at the Center on Global Energy Policy at Columbia University. I'm delighted to serve as moderator for this event, which is co-hosted by the World Bank and the Middle East Institute. This event is being broadcast on World Bank Live and also on the MEI website. I'd like to welcome our viewers from around the world who are watching this livestream in Arabic, French and English. I encourage all of you who are watching this meeting to participate in the conversation via the hashtag being used for the IMF-World Bank Spring Meetings, which is #RethinkingDevelopment. To kick off this launch event, we will hear first from the World Bank's Chief Economist for the Middle East and North Africa Region, Dr. Roberta Gatti. Dr. Gatti will share with us findings from the report, which is called Altered Destinies: The Long Term Effects of Rising Prices and Food Insecurity in the Middle East and North Africa. Over to you, Dr. Gatti.
Thank you, Karen, for the kind introduction. Thank you, everyone for being here with us today. Let me share the presentation and JJ, if you can just confirm that you see it now in the slideshow modality, that would be helpful.
I can confirm that.
Perfect. So here we are, Altered Destinies and the Challenge of Food Insecurity in the Middle East and North Africa as the core topic that we decided to focus on for the April 2023 Update of the Economies in MENA. This is a product of the MENA Chief Economist Office, and you see all the authors acknowledged here on this page. As is customary for this type of report, you will see a first part, which focuses on the macroeconomic outlook, and a second part which focuses on the spotlight theme, which is food insecurity and which we believe is very timely for our region. At the cost of spoiling the surprise, let me start with some of the key messages of the report, and I will begin with the macro story. The macro story is one that sees a slowdown in main economic growth after the oil windfall of 2022. The region that grew at 5.8% in 2022 is now forecast to grow at only 3% in 2023, and much of it is due to the change in growth expectations for GCC, the Gulf Corporation Countries, which grew on average at 7.3% in 2022, but are expected to grow around 3.2% in 2023.
Now, a concern that has been on everybody's mind for 2022 has been inflation. It's true that the region’s inflation rate rose dramatically in 2022, although in a previous report, we showed that this inflation rate was lower than the counterfactual that it could have been thanks to various product market interventions. But here what we focus on is the fact that food inflation grows even faster. Just two numbers that I would like you to keep in mind. Food inflation year on year between March and December 2022 was 29%. Headline inflation year on year was 19%. Why should we worry about rising food prices? Even if they are temporary, even if they taper in the coming months? We should care about them because they pose severe challenges to the region that may last for generations. What you will see in the report is thinking through the causal chain of how rising food prices can affect nutrition for children, young children, or in utero, what the implications for their productivity as future workers are, and we will see also what are the policies that can be enacted to counteract these challenges. Now, these challenges compound an already inadequate situation of child nutrition and health pre COVID-19 in the region.
Something that you might expect to hear from me if you followed at all. Our recent series of MENA Economic Update is the focus on data. Unfortunately, and as in other sectors, even for child nutrition and health in MENA, we have dated data, and so policymakers and also economists are flying a little bit blind. Now, when we move from what has happened in the past to what we can forecast for 2023. The report has also used new techniques, such as machine learning, to forecast a measure of food insecurity for the region. It turns out that food insecurity has deteriorated in the region and probably unsurprisingly, but equally sadly, it has the hotspots in Syria and Yemen.
The conclusion that you see me bring into the conversation, at least the presentation of the report today, is that we need to act now because the cost of inaction, because of the repercussions through the productivity over a lifetime of children, but also repercussion of future generations, can be much higher. These are the key messages.
Let me now start with the macro outlook for the region. What you see here on the left is how the MENA region depicted in dark red in panel A performed in terms of cumulative growth starting from 2021 vis-à-vis the world. You see that the red line, the dark red line is much above the yellow line. The steeper slope that you see between 2021 and 2022 is indicative of that 5.8% that I was mentioning, which is higher than the average growth rate. Then you see that the slope of that line flattens out and that indicates the suit of 3% forecast for next year and the suit of 3.2% forecast for 2024.
On the right hand side panel, on panel B, you see a tale of two MENAs. The growth spurt in 2022 was really driven by GCC oil exporting economies and you see their growth trajectory depicted in dark brown at the top, very fast growth in 2022 and a slowdown in 2023. You see also in the lighter brown color at the bottom the trajectory of oil importing countries, excluding Egypt. You see at the end towards 2024, except for a variation, a divergence between this growth path in oil exporting economies and oil importing economies. The dash line represents a little bit of an outlier, which is Egypt. Egypt grew very fast in 2022. Its growth forecast has been downgraded to 4% from 6.6% in 2022. For 2023, on the back of improved receipts from tourism, the Suez Canal and construction, however, it is a country that presents long standing vulnerabilities. When we look at the private sector forecast, we see that the range of forecast is very wide for Egypt in 2020 through anywhere between 2% and 4.5%.
Now, I was talking about private sector forecast, and what you see here in this slide is exactly some sort of manipulation or algebraic work on private sector forecasts, which are produced monthly. We thought that this was interesting and useful because we could look at how the growth forecasts were updated every month, starting with February 2022, which was the time of Russia's invasion of Ukraine. What you see on the left hand side are the forecast upgrades or downgrades for 2022. You see a sharp upgrade on the growth forecast for oil exporters and GCC immediately after the Russian invasion of Ukraine and you see a progressive downgrade of growth forecast for oil importing countries, represented here in sort of light brown continuously until about October 22, and then kind of plateauing until February 2023. What you see for 2022 is this divergence, this tale of two MENAs that I was referring to at the beginning.
What you see for 2023 is a continuing tale of two MENAs, but at the lower levels of growth. In February 22, the forecast for 2023 were upgraded upwards for oil exporters. Then things started tapering down, and they progressively tapered down for developing oil importers, which are countries about which we are overall more concerned in terms of their macroeconomic outlook.
Now, I told you a tale of two MENAs for growth, but I think that a tale of two MENAs also applies for the question of inflation, which is one of the other big concerns that we have about the region. When I was talking about growth, the dividing line was oil exporters versus oil importers. Here, the dividing line of these two MENAs are countries that are in a fixed conventional peg with the dollar or with a basket of currencies, and countries that have other forex arrangements. Let me just go through this slide, which is probably the more complicated of the presentation, little by little. What you see here is the average year on year inflation from the sort of post pandemic until February 2022 in the region. You see quite a variation in inflation levels including, and please note, Iran and Lebanon are set aside and their inflation rate is measured on the right hand side axis because of it being off the chart vis-à-vis inflation rates of other countries.
What happened post February 2022? You see this highlighted in yellow and with this horizontal line representing just by way of benchmark the US year on year inflation. Inflation increased in 13 out of our 16 countries and increased proportionately more in this group of countries where you see other forex arrangements. Countries whose currency was allowed to devalue, depreciate or move within some band. Since exchange rates seem to be so important in determining the inflation rate measured within a country, we calculate the counterfactual inflation rate that would have happened once we adjusted the exchange rate movements. What you see is almost by construction and definition no change between the yellow bar and the blue bar in the first group of countries that have a conventional fixed peg because their currencies did not depreciate, but what you see on the right hand side in the group of countries of other forex arrangement is that in a country like Egypt or the Palestinian territories, the exchange rate depreciation/devaluation accounted for the bulk of local inflation. So, as we keep that information in mind, let's move now to food inflation which is somehow the core, the nexus of our report and the one that links in the macroeconomic part with our spotlight on food insecurity.
What you see in the second slide is average food inflation before February 2022 in dark red and average food inflation post Russian invasion of Ukraine. What you see is that food inflation has increased almost across the board with just a few exceptions, and it has increased proportionately more in countries with other foreign exchange arrangements. Some of these countries are large food importers and the flexibility or ability to move, therefore an exchange, translated into much more costly food items internally. Now, to bring the two of them together, headline inflation and food inflation, we're going to the next graph, and what we see here is food inflation represented on the Y axis and headline inflation on the X axis. You see that with the exception of Jordan and Qatar, all of our countries had higher food inflation than in headline inflation. I just wanted to remind us that Egypt and Lebanon are essentially off the charts and my hand is going like towards there up to the right because their food and headline inflation were so high and read on a different scale. Now, why is this focus on food inflation?
Let me give you two reasons, one which is immediate and one which is long term. We know that inflation is regressive and that inflation always ends up hurting the poor the most. What about food inflation? High food inflation really meant that in the region the poor were hit the hardest in the developing parts of the region. What we did here is that we took a bunch of household surveys. We ordered the households by consumption per capita increasingly from the poorest to the richest. We grouped them into quintiles, and we looked at the share of that food occupies in their budget. We know that the poor tend to consume more food out of the total of their budget and through that we calculated what is this sort of implied annual inflation per each group from the poorest to the richest. What you see here for a group of developing MENA countries, which you see listed at the bottom is that the food inflation perceived by the richest quintile, which is represented in yellow, is quite a bit lower than the food inflation perceived by the poorest quintile of the population in these countries, which is represented, and it's above by about two percentage points all along between March 22 and December 22, and is depicted in red.
One of the first big concerns about inflation, and particularly food inflation, is that there are distributive properties of inflation that hurt the poor the most. This is something that really affects us here and now. The second element that we look at are the long term consequences of food inflation. Many of us are familiar with the vast literature that exists looking at the importance of prenatal and the first one thousand days of life for the development of cognitive function, productivity and even potentially the transmission of the intergenerationally of these trades. So, what we have done here is that we looked at one specific example of how food inflation can affect human capital. Let me just quickly walk you through this example to give you a sense of what the impact of increased prices can have on people. We looked at the exposure of food inflation in utero and this is something related to the fetal hypothesis, fetal origin hypothesis, that basically indicates being in the uterus as being in a crucial moment for the development of a child. It turns out that there are existing estimates that show that one percentage point higher month to month food inflation is associated with an increased risk of stunting for children. Stunting is a measure of height for age for children, which is taken at a different stage of their life but the typical measure that is used is under five. So, for any child under five, the exposure of the children who were in utero in MENA between March and June 2022 translates into a total increment of the risk of stunting in MENA from a baseline of 16.2% by 17% to 24%. This is high. In terms of number of newborns, it means an additional 200 to 285 thousand children were born with a clear risk of stunting. Now, should we just worry about stunting, which means being short for your age? Actually, that measure is more than just being short for your age. It's a stock measure of the health of a child and we know from the literature that it is associated with a lower performance in schooling in terms of both attainment and in this case, exposure to four months of increased inflation in MENA is likely to translate in anywhere between three weeks to a month or lower average school attainment. It was also reflected in lower test scores, and here we find a drop of 0.5% to 0.8% for tests.
Now, these shocks, and we're talking about the shocks to food prices overlay on a situation in MENA that was already somehow inadequate in terms of child health. What you see here in this graph is the prevalence of stunting, which is plotted and is measured on the Y axis. This will be the log of GDP per capita, just the typical measure that we have of countries well-being. You see the whole world, all the countries of the world plotted in gray and in red, you see MENA countries are highlighted. A couple of things to take from this graph. First of all, you see the name of the country, well, the World Bank three letter code with a date that is attached to that point. We have survey data which means directly measuring height for age for children. In Yemen only from 2013, and already in 2013, almost 50% of Yemeni children were stunted. In Libya, a country that is quite well off, in 2014, almost 40% of children were measured to be stunted. Stunting was also high in a country like Syria, and the three of them are the ones who, after this survey measurement, entered protracted times of conflict or political disruption.
This is something that is very likely to have deteriorated significantly in the past ten years and something where we, as policymakers and development practitioners, should put a lot of attention both on the terms of measurement, in terms of measurement, these data are old, they are 10-15 years old and in terms of policy action, the part of this graph where I would like to focus your attention is also the countries that you see at the far right. The richer countries in MENA are still highlighted in red and still above the fitted line, which means that these countries have higher stunting than their income, their level of income per capita would predict. Granted, in Saudi Arabia or Qatar or Bahrain, we have data that is quite old. We know that stunting tends to improve with income and with time. But even in countries like Oman and Kuwait, where we have more recent data, 2017 being quite recent, at least by MENA standards, we see that they are above the line and that they have a level of stunting and overall health of children that could be improved significantly from where they are.
Something that we also should remember, and this goes back to the distributional part of the story that for us in the World Bank is always an important concern that even within countries, we see differences in the level of stunting for the region. What you see on the left hand side is the stunting for different wealth quintiles of families. In a country like Morocco, for example, you see the rate of stunting in the first quintile, so among the poorest families, is above 20%, but the rate of stunting in the fifth quintile among the richest families is way below 10%. So, this is cut in half and there is a big width in country differences. On panel B, you see the countries that have stunting sort of at levels of the charts because you will note that the Y axis that goes all the way up to 60%, while the Y axis in panel A went up to only 35%. Let's just look at Yemen. In Yemen in 2003, a family in the fifth quintile, a child born in a family in the fifth quintile, the richest quintile of the population, has a chance of being stunted, which is half that of a family being born in the poorest quintile, which is in the red square represented above. Quite a bit of a different distribution across countries, a general underperformance vis-à-vis the world, but also important differences within countries for the sort of situation where these new shocks have come by.
A further piece of information that I wanted to bring about the pre pandemic story is that MENA is also a country that tends to underperform in terms of dietary diversity. Dietary diversity is fundamental for healthy growth of children. Why should we care about that now? Because food inflation can make certain nutritious foods less affordable for families. We are in a region that uses food subsidies quite significantly, including during the post pandemic period, controlling the prices or subsidizing the prices of certain foods, not all of which end up being the most nutritious. What I'm hinting at here is not only stunting and malnutrition, but the double burden that is very typical of middle income countries, of having both, children that are stunted, therefore, suffering from malnutrition in some form, and children that are obese. I need to be true to myself. I need to conclude the part of looking back in the situation of health of children in MENA by looking at how we measure it and how well we measure it. Unfortunately, the story in here, I will sound like a broken record in this presentation, in MENA, only 11 out of 19 countries have data, survey data, directly measured data for health and nutrition of children after 2015.
Just a reminder, we're in 2023. Many things have changed since, including the pandemic, protracted conflict, and now this shock that has come from the Russian invasion to Ukraine. Just as a comparison, a country like Mexico has its last directly measured survey for health and nutrition of children in 2022. Now, I looked at the past and I looked at the sort of causal channels through which food inflation can affect human capital. Let us look now at the present and this is the part where we relied on a collaboration with our research department here at the World Bank and we had a sort of modeling and forecasting of severe food insecurity in the MENA region, using data from the FAO and using machine learning technique to predict this data where data were not available. What comes out of this story about severe food insecurity and what you see here in the graph is the forecast for 2023. A couple of things to note. First of all, food insecurity in the developing part of MENA has deteriorated quite significantly in the past 20 years, going from 11.8% in 2006 to 17.6% in 2023. Unsurprisingly but equally sadly, Syria and Yemen are the hotspots of this food insecurity. This is data modalization pre the 2023 earthquake so the situation might be even more dire in Syria. Something else that we should note is that upper middle-income economies, Jordan, Iraq and Lebanon are significantly underperforming their income peers, and you see in the difference between the top of the dark blue lines and the dashed line, which represent the benchmark prevalence for countries in the same income group. We also see that the high-income countries are somehow underperforming vis-à-vis high income peers, and the one that is underperforming the most is Oman and one of the countries that should put significant attention to child health and development. Now, if we talk about attention to child health and development, what can we do? First of all, we need to act now, and I hope that by highlighting and bringing to light the long term consequences of food insecurity, I convince you that the cost of food insecurity compound over time within the life of a person but can also have a repercussion intergenerationally. Many things can be done. Cash and in-kind transfer can be the first port of call to protect the most vulnerable. In a situation of tight fiscal space, which is definitely the case for oil importing countries, not the case for oil exporting countries necessarily, targeting of the poor can make this action the most affordable fiscally.
We talked about the importance of shocks while in utero. You do not only want to protect the child, but you really want to protect the mother. The whole set of policies that protect expectant mothers, that allow them to take care of their children effectively and that continue to invest on changing the norms about mother nutrition while expectant is very important. Of course there are also longer term and supply side we can define and policies that can aim at building resilient food systems in a region like ours, which is highly exposed to things like droughts and weather shocks, but also expanding the coverage, and some of our countries are doing that effectively. The coverage, the access, the affordability and reducing the fragmentation of health care.
I want to conclude here on data and make sure that data is not enough. If we fly in the dark without data, we are not able to assess the actual situation of child health and nutrition. We are not able to design effective actions and we are not able to target them effectively so that the costs are contained. Let me stop here and thank you for your attention and I look forward to the conversation that will follow. Thank you, Karen, and over to you.
Thank you, Roberta Gatti, again with her commitment to survey data and tracking human capital in the region. Thank you for that excellent presentation. Let's have a bit of a panel discussion now. I'd like to introduce our esteemed panelists. All of their bios are on the World Bank Live page, so I'll keep the introductions brief. You can learn more about them online.
First, we'll go to Mr. Ferid Belhaj, who is the World Bank's Vice President for The Middle East and North Africa. Second, we will hear from Dr. Muhammad Sulaiman Al Jasser who is President and Chairman of the Islamic Development Bank Group and the IDB was a partner in this report, which you can also see the full copy online. Third, we’ll go to Dr. Paul Salem, who is President and CEO of the Middle East Institute, and Roberta Gatti will be with us to handle other questions. If we have any technical questions about the report and we'll get more from her economist perspective. If it's all right, I'd like to go to Mr. Belhaj first and let's kind of point back to the World Bank and your work on a day to day basis, what is or what can the World Bank do to address food insecurity across the Middle East and North Africa right now?
Thank you very much, Karen. Again, I'd like to thank his Excellency very much, the President of the Islamic Development Bank, and Paul for engaging with us and hosting us and also of course, the whole World Bank team and the Islamic Development Bank team who have worked to make sure that this report is issued on time and with the high quality that we have been accustomed to. Thank you so very much for that.
Your question is a broad one and I will answer at two levels. First, in terms of the overall approach that we have taken in the Middle East and North Africa region, as a way to engage strategically with our countries, we have adopted what I would call the full product approach. We are in MENA, engaged in a number of emergencies, food being one of them, but we have a number of others. We are also at the same time engaged in medium and longer-term reform agendas. So, yes, on February 25 of last year, when Russia invaded Ukraine, we immediately, that day, sounded the alarm bell because we understood that what's going to happen clearly will have a direct impact on our countries and we wanted to move fast. We did move fast. We moved on a number of urgent food security operations, whether it is in Lebanon immediately, in Tunisia, in Egypt, in Djibouti, and we were ready to open it even more. What is interesting is that there was a lot of complementarity between us and the Islamic Development Bank because I'm sure that His Excellency would mention that the Islamic Development Bank moved on a very sizable operation in Jordan as well. It was a very well-coordinated and broadly defined engagement. We engaged in it immediately. But at the same time, because we are looking at more of a sustainability engagement on this particular issue, we have put together a number of operations that would, in a way, transform the way countries are managing their food security agenda and their policies on that. We engaged in Jordan, in Egypt and other places in terms of putting together new policies for new agricultural engagements and basically to change the overall food system in a comprehensive way. We also have managed to engage with a number of countries again, Egypt being one of them, Lebanon being another one to make sure that when we engage on this issue of food security, we also engaged on the broader agenda that is water. That is the agenda that has a lot to do with working on helping countries get more fertilizers. We have in the Middle East and North Africa one of the largest fertilizers companies in the world and that's the Moroccan Office Chérifien des Phosphates, with whom we are working very closely. We are engaging in that and making sure that, again, we address the immediacy of the threat, the immediacy of the constraint, and at the same time we make sure that we are looking medium and longer term.
Let me finish with this, on this particular issue, because the issue of nutrition is an important one and with Roberta a few years back, we worked on the Human Capital Project that was launched during the Annual Meetings of the Bank and the [IMF] Fund in Bali a few years back. That is really important because through that operation, through that engagement, through that research, we were able to identify how much a human brain is affected by malnutrition and we were able to put numbers behind it. We were able to put a face, a human face behind what malnutrition meant and what it means for the future of a child, and what it means for the future of countries overall. That also is a very important discussion to be had and I'm sure that Roberta can elaborate more on it, but I would urge you to, if I may, go back a few years and take a look at the research that underpinned that Human Capital Project because it is really an eye opener and it really gives you a sense of what it means to be hungry today for the future of nations. For example, let’s call that the new wealth of nations, in a way, is their human capital. It is very important to keep that very much in mind. Again, I would urge another conversation about that particular agenda. Thank you very much, Karen.
Thank you, Mr. Belhaj. I think that's such an important link. What you're really pointing to are these connections, of course, between the food, the fertilizer, the energy security nexus, and then the importance of tracking in terms of human capital over time. Really important work that is going on there. I'd like to move next to Dr. Al Jasser. Roberta talked a lot about in her presentation the kind of divergence in terms of inflation impact across the region. If you might address, the inflation rate in the Gulf has been relatively low. We know, of course, this has something to do with the monetary policy in peg currencies. Could you highlight how these countries have managed to keep inflation more under control?
[Muhammad Sulaiman Al Jasser]
Thank you very much, Karen, and thank you, Roberta, for that presentation. Thank you, World Bank and Paul, for putting together this panel discussion. Very timely. I think the GCC has been blessed in many ways. One of them is the consistency of policies. I think in terms of inflation, monetary policy as a signal, not just an act, but as a signal, is a very important one. Take Saudi Arabia, for example. Since 1986, the exchange rate has not changed at all. You will have people say, but things have changed, and the exchange rate has to change with them and all of that. That's a big debate. I think the markets and the consumers, and the investors relied on that anchor and they did everything around it. That has provided the stability and prices in the GCC that we have witnessed and we have enjoyed in the GCC. I think in country commodity producers, we should never underestimate the importance of exchange rate stability. I would even claim that we should never underestimate the importance of monetary stability for all economies, not just for commodity producers. The numbers have shown that.
Of course, that's not to say that macroeconomic policy, particularly fiscal policy and trade policy, didn't play a role. It also played a role. Also that was predictable. Competition, for example, the Saudi market, be it for food products or any other products, is very strong. Competition provides a shield from the exorbitant prices that sometimes are not as a result of shortages as much as they are of manipulation. As we learned in economics, prices are very flexible upward but very sticky downward. If you do fiscal and trade policies in addition to the monetary policies and the exchange rate policies, that will give a predictable, stable outlook that tends, I think the GCC countries have shown the example, to keep prices way below what would be the case otherwise. That's why you see, for example, if you take the MENA countries, excluding the GCC, you will see that the price rises are much higher than they are in the GCC countries. As I said, trade policies are also very severe. Competition has been very instrumental in providing the necessary supplies and shielding the domestic markets from the ups and downs of the markets. Shielding, and I do not mean that they do not get affected, but the effect is much more moderated and much more mitigated than the case would be.
Of course, the GCC, again, one of the other blessings is that food in the basket of consumption of the consumers is much smaller. So, the effect on food prices is much smaller. The effect of food prices on inflation is much smaller than in other countries, be it in the MENA or in other countries. That has also worked very well in favor of the GCC. To conclude, I think there has been insufficient attention paid to the impact of a predictable, stable anchor for monetary policy and exchange rate policy. In economies that are still in a development stage, that is very important and if we need any evidence, we can just look at the GCC. Thank you.
Thank you, Dr. Al Jasser. That was a strong defense of the tight monetary policy in the peg system. Thank you for that. I'd like to go to Paul Salem. Paul, I know that MEI has done some interesting collaborative work with the Arab Barometer, and I'd really like to hear your take more on sort of a view from the region. What do we hear from people inside the Middle East, North Africa about inflation and food inflation, food insecurity? How is this being expressed through public opinion survey?
Thank you, Karen. It's lovely to be with everybody on this panel and honored to work with the World Bank and the Islamic Development Bank. We have been collaborating with the Arab Barometer Project, which is a fantastic public opinion survey project that's been going on for almost 15 years now. It's out of Princeton University. The research director there is Salma Al-Shami, and they recently put out a report about public opinion relating to food insecurity. These are surveys that were done between 2021 and 2022, so recently, but may not have taken into account all of the effects of the Russian war on Ukraine, but at least some of them. The surveys were in ten countries, Egypt, Iraq, Jordan, Lebanon, Libya, Mauritania, Morocco, Palestine, Sudan and Tunisia. Importantly, they were not conducted in Syria and Yemen, which, as we've seen from the World Bank Report, are far and away the countries with the most acute food insecurity. But even in the ten countries that I mentioned, in eight out of ten of those countries, half or a majority of respondents said that they do not have the means to secure food to last an entire month. That is either sometimes the case or often the case. That gives you an idea of how high, in the minds of respondents, half or more than half. In Egypt, it's almost 70%, where food insecurity is the most acute concern and worry of these populations. That is definitely a stunning figure. That figure was already bad before the events that began in 2020 with COVID-19 and then the developments of 2022 with the war in Europe and then inflation and all of the crises that came after that, let alone the earthquakes, as mentioned, that impacted certainly Syria and neighboring Turkey.
In 2019, the number of food insecure people was 55 million out of about 400 million in the Middle East and North Africa, that number clearly has gone up. One sixth or one fifth of the population of the Middle East and North Africa is food insecure. That is a devastating figure. Obviously, much of this reverts to governance issues that we, and others at the Middle East Institute and others look at very closely. It's kind of staggering to think that almost 75 years since the Middle East state system took shape, that one of the primary functions of government is not to have high levels of hunger or food insecurity. Yet here we are in the third decade of 2023, and hunger and food insecurity are not getting better. It did not get better in the past decade, between 2010 and 2019. It certainly got worse in the last four or five years. I think that is a very stunning and sobering thought.
Obviously, a lot of this food insecurity is high in conflict countries. Syria and Yemen are the obvious ones. But also you take countries like Libya and Iraq, Lebanon, to some degree being a semi-conflict country. So conflict and state failure, partial state collapse is a big part of it, but you also see significant differences on a gender basis that women, and obviously women heads of household, but women in general, are much more affected by food insecurity than men. We see a rural urban divide in the public opinion surveys. That in the rural areas, in a sense, maybe surprisingly, you see more food insecurity than you do in urban areas. Obviously, income is a divider. People with high income obviously have much less food insecurity. It's really a stunning set of responses.
The remedies for this from public opinion are not necessarily clear. It's interesting that there still is a general preference in terms of governance for democracy as a governance system. You can certainly link issues of voice and inclusion, or the absence of voice and inclusion, because generally poor people in these countries that are surveyed do not have a voice in policy making and those are the people that go hungry. It's something to look at, something to consider. Thank you, Karen.
Thank you, Paul Salem, for those remarks and for bringing us back to thinking about how people are describing their own situations right now in this difficult time. I'd like to go back to Dr. Gatti. Roberta, could you walk us through a little bit about the evidence behind this premise, this very stark premise of the Report that food price inflation hurts children, but that the consequences are so enduring and that you can measure them. Even a short term price shock in food can create these consequences in learning and in stunting. How do we know this? Can you walk us through that, please?
Yes, Karen. This is a question that is very close to my heart, having been one of the co-creators of the Human Capital Index. Before I delve into that literature, I wanted to make a clarification about the Report and one of the slides that you saw on inflation, the one that sort of grouped countries in fixed exchange arrangements and other arrangements. Clearly, a foreign exchange arrangement is part of a broader system. Not all fixed exchange arrangements can be sustainable unless the fundamentals aren’t right. There's something about GCC countries, about the wealth of their savings and the positive terms of trade shock that they had in the past years that made those pegs sustainable. On the other hand, the countries that were in different arrangement and might move towards flexibilization were in situations with preexisting vulnerabilities. To me, the foreign exchange system is more of a symptom rather than a direct cause and it's something that reflects the more complex fundamentals that you see behind the economy.
Now, let me go back to what has been a passion for me for a lifetime. You ask about why these long terms were even a temporary shock. Let me sort of walk back a second to the concept that I put forth without even defining it, which is human capital. I think it's kind of intuitive. It's kind of like the sort of health and knowledge that is embedded in us. Something that I wanted to bring to you is that this definition of human capital dates back all the way to Adam Smith. I'm directly reading the quote from The Wealth of Nation, “The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense...”, this is the part of how important it is to invest in human capital, something that Ferid was alluding to, and it is a real capital in a person. Those talents are part of this fortune and likewise that of society. There is an individual dimension to human capital and there is a societal dimension of human capital.
Now, the point that we make in the Report is that it's two-fold. First of all, shocks can affect the accumulation of human capital and second, that prenatal and early years are fundamental and this is a little bit how the literature partition writ large. So, we have simulations for how increasing prices while in utero can affect stunting, schooling and school tests. Fetal origin is something that has been put forth by medical literature starting from the 50s indicating that the time in utero for a child is a critical time for the development later on. What this medical literature would then has been sort of adopted and expanded by the economic literature shows that children that were not in optimal conditions in utero then have worse health outcomes while children, and then there might be a long latency period but even in adulthood, they end up having suffer more from obesity, diabetes and cardiovascular issues as they grow. The second related stream is the one that looks at early childhood and these are the first one thousand days. Literature that looks at how nutrition and cognitive stimulation interact to help the building of neural pathways in the brain. Neural pathways in the brain are then fundamental for cognitive development, also for social emotional development and for productivity later on. Something that we have done in the human capital index is really to use this literature and condense it into a single measure that becomes a measure of the future productivity of a child born today in a country as a worker later on.
What we focused on in this report was how shocks can affect this process of accumulation. Then, the literature also sort of bifurcates and looks at either like very large shocks and we had one of those very recently, the pandemic. I saw a slew of papers coming out on what did the lockdown, what was the lockdown impact on not only schooling but child development, cognitive stimulation, but other large shocks could be famines or conflict. Then, there is a strand of the literature that looks at milder shocks of which I would say food inflation is one of them. It could be nutritional shocks, maternal stress or also weather and climate change. We see how these different literatures, the medical one, the environmental one and the health and human capital one come together to make sense of how human capital develops. For those of you who are interested in sort of learning more, there are excellent articles and Doug [Douglas] Almond and Janet Currie are some of the lead contributors to this literature. I really would invite you to read more and also maybe take a look at the Human Capital Index and how we thought through how the pandemic has affected human capital. We even have a recent report that really looks at how collapse and recovery has shaped through the pandemic for human capital. Thank you for that question.
Thank you, Roberta. It is a really rich literature and something that we are still trying to understand as the impact of the pandemic and, of course, anticipating future shocks, as you said, about climate, about conflict, how we measure and then prepare. That leads me to want to ask Ferid Belhaj, when you're thinking about the work of the Bank for the region, why should we? Or how do you decide to focus on these sort of long term impacts of food insecurity when we do have these immediate pressing sorts of needs, concerns about economic growth, this kind of global slowdown inflationary pressures, what that does also for debt service, it's sort of picking and choosing where you spend your own resources. So, why should we focus on, as Roberta described, these long term impacts of maybe a short cycle shock of this food insecurity?
Yes, maybe because we have, how should I put it? Shall we say arrogance of thinking that we can walk and chew gum at the same time. We can do short and medium and long term. If we don't do that, actually, we will be found in dereliction of duty. What we have been doing in MENA, as I mentioned earlier, throughout the years, and notably over the last, let's say, 15 years, is basically to make sure that anytime there is an emergency, we are there. We did it when it came to the impact of the Syria crisis on Lebanon and Jordan, we engaged very fast. When it came to helping the government of Iraq in 2014, when they had to deal with this triple whammy of oil prices going down and ISIS and the whole very difficult discussion with Kurdistan, we were there. When it came to the whole Arab Spring and some of the countries that were in a very difficult state of affairs, we were there. This is to deal with the immediacy, but we would not be rendering a service to our countries in the region if we do not look at the structural weaknesses that we see in, frankly, almost all of the economies in our region.
I guess we had that conversation maybe a few months back, if I look at MENA today, talking about human capital, I look at a region where there is a youth bulge, enormous youth bulge. The numbers that we have been putting on the table for years now, by 2050 three hundred million young people will be knocking at the door of the job market in the Middle East and North Africa. It is huge. It is huge in terms of a challenge, but also very much in terms of an opportunity. We all know that there will be no way to absorb this tremendous energy if we do not open the door to more private sector engagement, to more entrepreneurship, to allow the creativity of these young people to find its way into more productive purposes, because the public sector is not going to be helping at that level. This is something that we are looking at very carefully and looking at the type of reforms that we are engaging in. All of them go into that same direction, helping the human capital of MENA to be translated into actual economic growth. This is, again, something that we will never be able to do by ourselves. That's why having strong partnerships with like-minded organizations, the Islamic Development Bank being one of them is absolutely crucial. So, longer term is fundamental, but we should not forget that we also need to deal with what somebody way more famous than me said one day, the fierce urgency of now. This is something that we also need to look at. This is a two-pronged approach that we will keep pushing as we move forward.
Thank you, Ferid. Maybe I'll give the last word then to Dr. Al Jasser from the Islamic Development Bank. This report was in partnership between the World Bank and the Islamic Development Bank. Maybe just a couple of words on your long-term thinking about facing insecurity and counterbalancing it in the region.
Oh, you're muted, Dr. Al Jasser.
[Muhammad Sulaiman Al Jasser]
Sorry for that. I just want to just confirm what Roberta also said. When I talk about a fixed exchange rate, I talk about a credible, sustainable one. I do not talk about others that are just choices of convenience. No, these are choices of deliberation and long-term planning with the rest of the macroeconomic policies. We and the Islamic Development Bank have been very concerned about the events that happened over the last couple of years. First, it was the COVID-19 and then we've had the food prices emanating from the conflict in the Ukraine. Then of course, we have the climate issues becoming very serious and we have embarked upon putting packages or programs to deal with these issues. We had one about a 4.5 billion dollar package to deal with the COVID-19. We had a 10.5 billion dollar package to deal with the food crisis and we had about a 13 billion dollar package to deal with climate issues and how to ameliorate the climate difficulties that are facing our member countries. The important thing here on the food, because we're dealing with the food here, is that one third of that amount is going to go and finance short term concerns like building up stocks of grains and fertilizers but the other two thirds are really there to invest in long term farming that will enable the population of areas to depend on themselves to produce enough food for them and hopefully then for the urban areas after that. This is very important. One of the major mistakes that have been made in the past is that we neglected agriculture. We paid all the attention to industrialization, and we forgot that we have to feed people before they can become industrial or become anything else. That is really where we, in the Islamic Development Bank, are focusing on, and we have already committed more than out of the 10.5 billion. We have already committed more than 1.7 billion, and the rest is under consideration. We hope that the membership, also in collaboration with the World Bank and other institutions, will bring about real change in the way we deal with farming and food production and food distribution in the member countries.
I think we may have to pause there. We have run out of time, and it looks like we have had such a good discussion. Lots more to continue, I think. But I'd like to thank our esteemed panelists for these excellent insights into both the economic trajectory of the MENA region plus these devastating and long-term impacts of food price inflation, particularly on young people.
Thank you to our audience for joining the broadcast. You can read the full report by going to the World Bank's website. Thank you all and have a good afternoon, good evening.