The World Bank on Tuesday predicted a moderate economic recovery for the Middle East and North Africa (MENA) in 2021, while highlighting the many challenges still posed by the coronavirus pandemic.

The Washington-based institution said the pandemic had seen the region's economies shrink by about 5 per cent in 2020, inflicting heavy job losses and a sharp increase in the number of people living below the poverty line of less than $5.50 a day. 

"Among oil exporters, growth is expected to recover to 1.8 per cent this year, supported by normalising oil demand, the scheduled easing of the OPEC+ oil production cuts, policy support, and the gradual phasing out of domestic pandemic-related restrictions," it said in a report.

Saudi Arabia, the largest economy in the Arab world, will benefit from the resumption of public projects, which had been postponed at the beginning of the crisis, and the recovery of demand after a sharp rise in VAT, it said, tipping a 2 per cent expansion.

Growth should also accelerate to 1.5 per cent in Iran thanks to the recovery of domestic consumption and tourism and the mitigation of the effects of COVID-19, they added. 

Growth in other countries in the region is expected to reach 3.2 per cent in 2021 due to the easing of travel restrictions and a slow recovery of domestic demand. 

However, it is expected to reach only 2.7 per cent in Egypt, the most populous country in the region, following the "collapse" of various sectors, notably tourism and gas extraction.

The World Bank warned that regional economies faced a variety of hurdles as they try to get back on their feet.

"The recovery is contingent on containment of the pandemic, stabilising oil prices, no further escalation of geopolitical tensions, and the assumption of a vaccine rollout in the second half of the year," it said.