Amid regional turmoil, World Bank report shows economic downturn

The Arab Spring, which turned into the Arab Winter, has had huge costs. One estimate puts the loss at $800 billion.

A child vendor sells fuel in Idlib. (photo credit: REUTERS)
A child vendor sells fuel in Idlib.
(photo credit: REUTERS)
A report recently released by the World Bank shows that during ongoing regional upheaval, Middle Eastern and North African countries’ economies are slowing, and unemployment and inflation are increasing.
The World Bank MENA’s (Middle East and North Africa) Quarterly Economic Brief, released in January, examined seven of the region’s economies: Egypt, Tunisia, Iran, Lebanon, Jordan, Yemen and Libya.
“Short-term policy actions, such as increasing public sector wages and subsidies – aimed at reducing social tensions – exacerbate the situation, which is driven by long-standing structural weaknesses, including labor market rigidities, complicated and opaque regulations, infrastructure deficiencies, regressive and inefficient subsidies and inadequate social safety nets,” it said.
Since the “Arab Spring,” these countries had political and economic instability and a decrease in growth, said the report.
“The Arab Spring, which turned into the Arab Winter, has had huge costs. One estimate puts the loss at $800 billion but the real costs are likely to be higher and enduring,” said Paul Rivlin, an economist and senior research fellow at the Moshe Dayan Center for Middle Eastern and African Studies at Tel Aviv University, in an article for the Center’s monthly newsletter, Iqtisadi: Middle East Economy.
Rivlin told The Jerusalem Post that the uprisings have caused a great deal of damage in many countries, including a loss of tourism and investment.
Rivlin writes that Syria is the most “dramatic example,” since the country’s economy has plummeted as 130,000 people have been killed.
“Up to half of the Syrian population is internally displaced and 2 million refugees are straining [the] capacities of neighboring countries.”
Rivlin wrote in the article that “many countries in the region also suffer from a challenging business climate, characterized by poor and limited infrastructure such as costly, unreliable and inefficient supplies of electricity and water.”
He concludes that the political problems in the Arab world hinder the implementation of needed reforms.
The World Bank report says that the interim Egyptian government announced two stimulus packages since August, totaling $8.7b., financed by budget savings and aid from Saudi Arabia, Kuwait and the United Arab Emirates.
These packages increase government spending and public sector wages, with the aim of increasing growth to 3.5 percent in the fiscal year ending in June.
However, the report notes that real GDP growth in Egypt has been stagnating at around 2% and that total investment decreased by the same amount in the fiscal year of 2012/2013.
The official unemployment rate reached 13.4% in the third quarter of 2013, but it is believed that the real rate is much higher when taking into account the black market economy. The rate of unemployment for women is twice that of men, reaching 25%.
Another statistic shows 74% of unemployed are youth ages 15 to 29. Another 30% of unemployed have at least one university degree.
Government subsidies continue to grow, adding to the country’s debt, which reached 13.7% of GDP in 2013.
On Iran, the brief indicates that a quick improvement of the dismal economic situation is unlikely. Growth has contracted for two years and the outlook for next year is “bleak.”
“Oil exports have been halved and the financial system has remained constrained, partly by international sanctions,” it said, pointing out that inflation is high, having reached 35% in December.
The unemployment rate is 12% and the rial has lost 80% of its value against the dollar since March 2012, though it regained a bit in December.
Lebanon, which has been unable to form a government, has its own deep sectarian divisions, which are increasingly being affected by the war in Syria.
Around 866,000 Syrian refugees flooded the country in 2013, which makes up 20% of the Lebanon’s population, said the report. In addition, the high public debt and lack of tourism hinder the economy.
The Lebanese unemployment rate is at around 12-13%.
In Jordan, the report says that the stoppage of gas flowing from Egypt, combined with the influx of Syrian refugees, are straining the economy, which is not expected to grow higher than 3% – its rate for almost three years.
Unemployment has increased to 14% in the third quarter of 2013. The country did, however, have an increase in foreign direct investment in the first half of 2013, reaching $1b.
Libya’s growth is decreasing – following a recovery in 2013 after a sharp drop in 2011, due to the uprising.
The economic rebound in 2012 was mainly due to oil, according to the report, which accounts for around 70% of the GDP and 95% of its revenue.
Oil worker strikes and militia interference have reduced production.
The public sector is responsible for 80% of employment, with only 4% employed in the private sector.
The unemployment rate was around 15% in 2013, though in reality it is believed to be closer to 30%, the report said, adding that youth unemployment is at around 50%.
According to statistics from the World Bank and the IMF, in 2012, Libya’s government spent more on fuel subsidies than it did on education or healthcare.