Russian-Ukrainian conflict will not have major direct impact on Mena region, economists say – News

Only the energy and tourism sectors are likely to be impacted by the military conflict

Oil producers could also benefit if they decide to intervene to stabilize the market and increase production, which poses an upside risk to the GDP growth forecast. — Photo of the AP file

Published: Sun 27 Feb 2022, 19:07

The Ukraine-Russia war will not have a major direct impact on the countries of the Middle East and North Africa (MENA), but the conflict will have an indirect impact on the region, in particular on the producing Gulf countries oil in the region, according to economists.

Exports from Middle Eastern countries to Russia and Ukraine are relatively not large enough to have a major impact compared to other major economies in the world, accounting for less than 2% with each European nation.

About 200 people have been killed and 1,115 injured since Russia launched an attack on Ukraine on Thursday. Since then, UAE airlines have halted operations to Ukrainian cities, citing flight and passenger safety.

“In terms of the economic effect of the conflict on the Middle East and North Africa, any blow to the Russian and Ukrainian economies is likely to have limited direct impact. Exports of goods to Russia from all countries are less than 1.5% of total exports and those to Ukraine are even lower,” said James Swanston, economist for Mena for Capital Economics.

However, the tourism sector in the region, especially Egypt, Tunisia and the United Arab Emirates, could be affected as these countries in the region are popular destinations for Russian tourists. In addition, UAE nationals also travel to Ukraine and nearby towns for tourism.

With the conflict leading to lower incomes in Russia and Ukraine, Swanston said “it could lower tourism in the region” as very few visitors are expected to visit the area.

Mir Wasim Raja, director, MICE and vacations, Galadari International Travel Services, said some groups planning to visit Serbia, Ukraine and Baku in January had put their plans on hold. “Travellers are also a little reluctant and reluctant to travel to Georgia and Armenia.”

Avinash Adnani, chief executive of Pluto Travels, noted that there is no major impact on the travel industry at the moment, but believes that travel will suffer if the conflict drags on.

Maya Senussi, senior economist at Oxford Research, said Russia’s attack on Ukraine could impact Turkey on three fronts: tourism, energy prices and financial market disruption.

The biggest impact will be on tourism, with arrivals from Russia accounting for 19% of the total and Ukraine 8.3% for Turkey in 2021.

Senussi added that soaring energy prices would further squeeze household incomes due to rising import costs, the pound’s vulnerability and inflation, which has already peaked at nearly 50% in two decades. “We now expect inflation to peak closer to 60%.”

Indirect impact

James Swanston noted that the indirect effects of the crisis could have a greater impact.

“The first concerns the implications for global energy markets. The price of Brent crude has risen above $100 a barrel…Gulf economies stand to benefit from higher energy prices as stronger hydrocarbon export revenues will strengthen both current accounts and fiscal positions he said, adding that in contrast, the balance sheets of non-Gulf countries economies that are largely net energy importers will worsen and inflation is likely to rise there. where fuel subsidies have been removed.

Swanston added that oil producers could also benefit if they decide to intervene to stabilize the market and increase production, which poses an upside risk to GDP growth forecasts.

In the long term, he noted that escalating tensions between Russia and the West could improve the prospects for Mena gas exporters if Europe begins to stop relying on Russian gas. This could provide an incentive to invest in gas production capacity in countries like Qatar, Egypt, Oman and Algeria.

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