Al Jazeera Net - London

Zakaria Karti, an economist with a number of financial institutions and at the European Bank, talks to Al-Jazeera Net about the repercussions of the Corona crisis on the world economy and Arab countries, and how Arabs can get out of this pandemic with minimal losses. Details in this dialogue:

The global economy has experienced many tremors since the beginning of the Coruna epidemic, what is the impact of these tremors on the global economic situation? 
The International Monetary Fund issued a report a few days ago, saying that the current crisis due to the Coruna epidemic would be worse than the crisis of 1929, although the statistics in that period were different, but the global GDP decreased by 1% at that time. 

Now in this crisis, we expect the global output to decline by 3%, and the number may increase if the quarantine period is prolonged, and the major countries have released their economic results for the first quarter of this year, and the numbers are very negative.

For example, France has achieved its worst result since the Second World War, and China has also achieved the worst decline since the end of the cultural revolution in 1976, as is the case for all European Union countries. Of course, these numbers must be taken with caution, as they can deteriorate if the crisis drags on and quarantine continues. 

It is expected that this situation will lead to major changes in the global economy and the map of the supply chain in the world.

In the past, there was heavy reliance on China and developing countries to take advantage of cheap labor, and all the major countries shifted their industries to China with the exception of Germany, and now everyone understands that this is a mistake, which will make us move to a diversified supply chain either by returning to Europe or to countries close to Europe. There is a desire to reduce dependence on China.

Currently, there is a European awareness of the mistake of neglecting industrialization in favor of China, and a willingness to change this situation. Here I refer to what was said by the former head of the International Monetary Fund Dominic Strauss, when he was surprised at how an important drug such as "penicillin" is manufactured by 90% in China.

Arab countries presented a package of economic measures, including reducing the central interest rate (Getty Images)

How do you see the treatment of the Arab countries and the economic measures that they have enacted to confront the epidemic?
The Arab countries have undertaken a package of economic measures, including reducing the central interest rate in order to encourage pumping more liquidity into the market, reducing prices of energy materials to encourage the industrial sector, providing assistance to exporters, and reducing taxes on the distribution of profits, and there are countries like Morocco that have resorted to forming a fund for national solidarity , And provide direct subsidies to the most vulnerable. 

It can be said that many Arab countries dealt quickly with the epidemic, but these steps remain insufficient compared to European countries that have the ability to enact an expansionary and fierce financial policy to face the crisis, and this policy does not exist with Arab central banks whose main concern remains to maintain balances Great economic.

How resilient is the economy of the Arab countries, the Corona crisis? 
First of all, this crisis hits everyone, whether the Arab oil or non-oil states. It is true that the oil countries are more affected by the decline in oil prices and from the decline in production after the historic agreement of OPEC Plus, and all Arab countries will resort to borrowing, and there are Gulf countries that have resorted to issuing bonds in the international financial market for the purpose of Budget deficit compensation. 

It is true that the margin of borrowing is greater for the Gulf countries due to their credit rating, but even the rest of the Arab countries will resort to borrowing, and there are countries with large debts such as Lebanon, which declared failure to pay debts, and the matter will worsen with this crisis. 

Even countries that would have assisted Lebanon in structuring its debts, such as France, have now stopped thinking about this. There is Jordan, which should pay $ 1.7 billion in debts this year, which is a large sum. That is why the non-oil states will be the most affected. 

 Karti: All countries that have ignored social welfare and social sectors will suffer (Al Jazeera)

What are the most important economic sectors that will be affected in most Arab countries?
Of course, the oil sector will be affected, and there is the tourism sector, which some reports say will lose $ 40 billion in all Arab countries, in addition to $ 10 billion for airlines.

And the tourism sector is important for a number of Arab countries such as Morocco and Tunisia, especially Jordan and Egypt because this sector represents for them 15% of the general domestic product, in addition to migrant remittances abroad, in Egypt for example exceeding 25 billion dollars, which constitutes 8% of the gross domestic product In Lebanon, the problem is greater, as Lebanese remittances are expected to decline.

In Morocco, the auto industry will be affected by the decline in global demand for vehicles due to the virus. 

Losing jobs in tens of thousands in different countries, will social pressure on countries increase?
The pressure will be not only on the Arab countries but also on the countries of the world, and all the countries that have socialized social welfare and social sectors, and now it will return to it strongly through doubling the benefits and compensation for losing work, as there are those who talk about comprehensive income, and this income is a salary granted by the state For all citizens regardless of its location, as a minimum to face the fragility and exceptional circumstances that anyone may go through.

But it must be noted that social welfare policy must consider ways of financing it without borrowing.

The solution, in my view, is to change the fiscal policy. For example, we find in some Arab countries that there are only dozens of companies that pay 80% of the country's taxes, and this means that there is a greater tax evasion. Arab countries must be stronger in collecting taxes, and taxes should be more fair. 

What is the time limit you expect to get out of the bottleneck and overcome this crisis, even if relatively? 
No one can predict the time limit, because getting out of this crisis is linked to the health issue and the date the vaccine was found.