Introduction
The severity of natural disasters is increasing the urgency with which we must address the problem of climate change. Two natural disasters struck the Arab world in the span of two days, shaking the region and sending a stern warning to the rest of the world. Before Libya was hit by a storm with a wind speed of more than 70 km/h, causing what are thought to be the worst floods of the 21st century, Morocco had hardly absorbed the shock of the terrible earthquake that had struck its lands. The events in Morocco and Libya altered the topography of those countries’ cities, placing pressure on their respective economies after the catastrophe. As things stand, the question is what the economic losses will be for the two countries.
Morocco
On 8 September, several cities were hit by an earthquake with a magnitude of roughly 7. The earthquake was the worst in Morocco in decades, killing thousands of people and dealing a severe blow to the country’s already faltering economy, which was already experiencing record-high inflation. Worse, the Bank of Morocco, the International Monetary Fund, and the World Bank downgraded their forecasts for economic growth in the country this year to just 3 percent because of the effects of the Russian-Ukrainian War on the economy, as well as the effects of drought on agriculture and inflation on consumption. The situation has gotten worse recently, and the earthquake’s effects are anticipated to make things even more difficult for the country’s economy.
Direct Losses
The direct losses refer to the level of destruction inflicted upon the affected regions and infrastructure. According to preliminary estimates, the earthquake completely destroyed about 500 schools, along with roads, clinics, lighting, and mobile phone networks, in addition to the losses that occurred in about 40 areas and the 600,000 population units. Furthermore, there is an additional cost associated with the reconstruction of the quake-devastated areas in Morocco, which, according to preliminary estimates, will take between five and six years. The US Geological Survey estimates that Morocco stands to lose 8 percent of its gross domestic product as a result of the devastating earthquake that struck multiple regions of the country, and that the losses could reach approximately $10 billion.
The earthquake will have the greatest economic impact on government emergency spending. On Thursday, September 14, the government announced measures that are anticipated to result in additional spending of MAD 9.1 billion, or 2.2 percent of the budget for 2023. This will have a negligible effect on the national debt, increasing the debt-to-GDP ratio from 90.9 percent to 91.6 percent. In April, the International Monetary Fund approved a flexible credit line of $5 billion for Morocco, meaning the additional debt will not incur a high interest rate.
Indirect Losses
Since the earthquake occurred during the height of the tourist season, the tourism industry was the one that was most negatively impacted, accounting for the majority of indirect losses. Notably, the tourism industry pre-Covid-19 accounted for more than 10 percent of economic activity and total employment.
The tourism industry, which is regarded as a significant source of hard currency in the nation, experienced a strong recovery in the first half of this year, with revenues reaching about $4.8 billion, an increase of 69 percent over the same period last year and 43 percent over the same period prior to the pandemic. This was due to the significant increase in the number of tourists visiting Morocco, which reached 6.5 million at the end of June. If we assume that the second half of the year would have attracted the same number of tourists as the first, the average possible loss would amount to $3 billion.
Libya
As the Daniel storm ravaged eastern Libya, it caused devastating floods that washed away entire neighborhoods in several coastal cities. The collapse of the dams in Derna greatly exacerbated the crisis, as these dams were holding large amounts of water in addition to the large amounts of rain that fell due to the hurricane. The hurricane that struck eastern Libya revealed the country’s poor infrastructure in the midst of citizen complaints about inadequate electricity, energy, transportation, water, health, and education services.
Direct Losses
The construction and infrastructure sectors were at the forefront of devastation, with thousands of homes and buildings collapsing, followed by the agricultural and livestock sectors due to the levelling of vast tracts of land. As 25 percent of the city of Derna vanished, many residential areas were flooded, and some buildings collapsed. Citizens’ property, such as automobiles, stores, and others, also suffered a great deal. Additionally, about 15,000 homes in Derna alone sustained partial and total damage, with 4,000 homes completely destroyed and the remaining homes suffering only minor damage. In light of this, the Libyan government declared Derna a disaster city, meaning that more than 60 percent of the city was destroyed, as the storm altered the entire city’s appearance and divided it into east and west.
Indirect Losses
Indirect losses are those resulting from the city’s business closure. Derna’s location along the fertile green plain is regarded as a commercial hub for agricultural activity, green pastures, and commerce. The most significant commercial district in Derna is Souq Al-Zalam, which is regarded as the city’s commercial epicenter and is home to numerous gold, watch, textile, clothing, and shoe stores that have shut down since Storm Daniel destroyed these historic structures. Furthermore, more than 30,000 heads of sheep and other livestock perished and ten agricultural areas in the eastern regions experienced 30 percent losses.
There are seven oil ports in Libya, and some of them were forced to close due to the storm. Ras Lanuf, Zuwetina, Brega, Sidra, and Hariga are among the ports that have been shut down. Libya, which has the largest oil reserves in Africa, is heavily dependent on the money it makes from selling its energy. In the first half of 2023, Libya’s total oil revenues came to about $6.95 billion. Port disruptions have the greatest impact on European and Chinese economies, and combined with OPEC’s decision to cut oil production, the result will be a global wave of inflationary fuel price increases.
