Arab Economic Transformation Amid Political Transitions


Masood Ahmed #2By Masood Ahmed

(version in عربي)

The International Monetary Fund released today a new paper entitled “Toward New Horizons—Arab Economic Transformation amid Political Transitions.”

The paper makes the case for the urgency of launching economic policy reforms, beyond short-term macroeconomic management, to support economic stability and stronger, job-creating economic growth in the Arab Countries in Transition—Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen.

These countries face the risk of stagnation if reforms are delayed further.Economic conditions have deteriorated from transition-related disruptions, regional conflict, an unclear political outlook, eroding competitiveness, and a challenging external economic environment.

As economic realities fall behind peoples’ expectations, there is a risk of increased discontent. This could further complicate the political transitions, impairing governments’ mandates and planning horizons and, consequently, their ability to implement the policies necessary to catalyze the much-needed economic improvements.

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Financial Support for Arab Countries in Transition


By Masood Ahmed

(Version in عربي)

The Arab Spring has injected new optimism into the Middle East and North Africa and, if managed well, the historic transitions that are under way will lead to a more prosperous future for the people of the region.

At the same time, the past year and a half has been difficult for the Arab countries in transition. They are facing economic strains as they manage political change and urgent social demands. It is a period when hard choices must be made, and it does not help that this is happening at a time of great turmoil in the global economy.

Close engagement

Throughout this difficult period, the IMF has remained closely engaged. We are advising countries on how to manage shocks to maintain economic stability, ensure that vulnerable households are protected during the transition, and lay the basis for job-creating growth.

We are also providing technical assistance to help build capacity and stronger institutions. In Egypt, for example, on tax reform to improve tax equity; in Libya to better manage its wealth through improved public financial management; and in Tunisia on measures to strengthen the financial sector.

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Without Better Data, Middle East Policymakers Risk Getting Lost


By Nemat Shafik

(Version in عربي)

Recently I went orienteering with my children as part of a school trip.  Orienteering is a sport whereby you have to find your way to various checkpoints through unknown terrain with only a compass and a topographical map.

Wandering through the woods with six 9-year-olds was a good lesson in the value of good directions and data to find your way when you are in unchartered territory.

Likewise, making policy decisions without adequate and timely data would also result in getting lost, wasting time and money, and making policy mistakes with obvious negative consequences for growth and development.

The Middle East and North Africa (MENA) region suffers significant shortcoming in data, which are particularly problematic at a time economic transition (see table below).  There are important data gaps, poor data quality and in many cases, internationally agreed standards of statistical methodologies, compilation periodicity and timeliness, and data dissemination practices are not followed.  I emphasized these issues during my participation at the ArabStat Conference in Morocco this month.

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Making Sure Middle East Growth Is Inclusive


By Nemat Shafik

(Version in عربي)

The uprisings that spread across the Middle East and North Africa in 2011 taught us that even rapid economic growth cannot be maintained unless it is inclusive, creates enough jobs for the growing labor force, and is accompanied by policies that protect the most vulnerable. And the absence of transparent and fair rules of the game will inevitably undermine the development process.

Hopes after the revolutions are high and so are people’s expectations. Hence, there is a need to pay more attention to socioeconomic issues in making policy decisions. In my speech today at the Arab Economic Forum in Beirut, I argued that we need an “Economic Spring” to complement what has become known as the “Arab Spring.”

Gloomy picture needs attention

At over 25 percent, the youth unemployment rate in the region’s oil-importing countries exceeds that of any other region in the world—a rate that reaches up to 30 percent in Tunisia and 32 percent in Morocco. Ironically, education in the region is not a guarantee against unemployment. In fact, unemployment tends to increase with schooling, exceeding 15 percent for those with tertiary education in Egypt, Jordan, and Tunisia.

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Arab Countries in Transition Under the Spotlight


By Masood Ahmed

(Version in عربي)

Historic transitions in several Arab countries are coming under increasing strain. Domestic uncertainty over the countries’ future course, compounded by the global slowdown and rising oil prices, took a toll on growth in 2011, and the current year will be equally challenging.

A joint and sustained effort is needed to help these countries navigate through this challenging period and set out an economic vision that is fair and inclusive.

Clear risks require strong resolve

The difficulties and challenges facing these countries were very much a focus of discussion during the recent 2012 IMF-World Bank Spring Meetings in Washington. The meetings brought together ministers and top officials from all over the world, with Middle East issues high on the agenda.

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Avoiding a Lost Generation


By Nemat Shafik (Version in  عربي)

Young people were innocent bystanders in the global financial crisis, but they may well end up paying the heaviest price for the policy mistakes that have led us to where we are today.

Young people will have to pay the taxes to service the debts accumulated in recent years.

Moreover, the global economy is threatened by continued strains in the euro area, and unemployment is still climbing in several countries, in particular in Europe. Young people (those aged 15 to 24) are the most affected, and youth unemployment has reached record levels in a number of countries.

If the right policies are not put into place, there is a risk not only of a lost decade in terms of growth but also of a lost generation.

Consider this. In Spain and Greece, nearly half of all young people cannot find jobs. In the Middle East, young people account for 40 percent or more of all unemployed people in Jordan, Lebanon, Morocco, and Tunisia and nearly 60 percent in Syria and Egypt. And in the United States, which traditionally has had a strong job creation record, more than 18 percent of all young job seekers cannot find employment.

Legacy of loss

Youth unemployment has long-term consequences for economic growth because of the loss or degradation of human capital. But it also has many other consequences, both for the individuals affected and for society as a whole.

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Bringing the Informal Sector into the Fold


By Masood Ahmed

(Version in عربي)

Unemployment rates in the Middle East and North Africa have remained above 10 percent over the past decade, the highest in the world. For the young the rates are even more daunting, at a persistent 25 percent: one in four of the region’s young people are without work. Many people who cannot find jobs in the formal economy are relegated to working in the informal sector, for lower wages and without the protections and opportunities that workers enjoy in the formal economy.

The informal economy is large and pervasive—and, often, ignored; however, the experience of those who work in the informal sector came under the media spotlight when Tunisian street vendor Mohamed Bouazizi set himself on fire that fateful day in December last year, sparking the Arab Spring protests.

Estimates indicate that the informal economy in the oil-importing countries of the Middle East and North Africa is substantially larger than in several Asian and Latin American countries. In Morocco, for example, the informal economy is estimated at 44 percent of officially measured GDP. In most other oil importers, it is estimated at close to one-third.

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