A new report by the United Nations Development Programme (UNDP) called ‘Military Escalation in the Middle East: Economic and Social Implications for the Arab States Region’ paints a stark picture of the widening economic and humanitarian fallout from the ongoing conflict in the West Asia that started with the US and Israel attacking Iran on February 28.
The findings of the report underline how intensifying military tensions are reverberating across the Middle East, threatening to reverse years of development gains.
One of the concerning findings of the report is that the GDP in the Arab countries could shrink by 3.7 to 6.0 percent, translating into losses of up to $194 billion.
“At the regional level, GDP is estimated to decline by approximately 3.7 to 6.0 percent, equivalent to a contraction of roughly $120 billion to $194 billion (in constant 2015 USD), with investment contracting more sharply, reflecting height‑ened uncertainty and reduced capital formation,” reads a finding of the report.
Both exports and imports are projected to fall across all scenarios, reflecting weakened regional and global economic linkages, says the report.
GCC countries to be hit badly
The heaviest economic losses are expected in the GCC countries and the Levant subregions. These areas are particularly vulnerable, says the report, due to their strong dependence on trade and exposure to energy market volatility. Output, investment, and cross-border trade in these subregions are likely to see the most pronounced declines as instability continues.
{{/usCountry}}The heaviest economic losses are expected in the GCC countries and the Levant subregions. These areas are particularly vulnerable, says the report, due to their strong dependence on trade and exposure to energy market volatility. Output, investment, and cross-border trade in these subregions are likely to see the most pronounced declines as instability continues.
{{/usCountry}}The GCC countries - Saudi Arabia, UAE, Qatar, Kuwait, Oman and Bahrain - have been hit the hardest after Iran in this war. The conflict has severely disrupted their export lifelines, particularly due to the closure of the Strait of Hormuz, through which a significant share of their oil and gas shipments normally passes. With vessels traffic collapsing and shipments stranded, energy exports from the region have dropped sharply, while attacks on oil infrastructure, including refineries and depots, have further constrained output.
Beyond macroeconomic indicators, the report also points to massive social consequences, leading to growing poverty. Under high-intensity escalation scenarios, nearly 4 million additional people could be pushed into poverty, says the report.
The rise in poverty is expected to be most acute in the Levant and fragile states such as Sudan and Yemen, where existing vulnerabilities amplify the impact of economic shocks.