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The Financial & Economic crisis in
the ESCWA Region:
Moving Forward
Bader Omar AlDafa
Under-Secretary-General, Executive Secretary UNESCWA
Characteristics of ESCWA Region
14 Member Countries
Natural Resources
• Large Oil and Gas
Reserves
• Water Scarcity & Arid
Environment
• Net importers of Food
Human Resources
• High population growth
• Young population Education level varied
• Large number of migrant
workers
Development Trends
HDI rank (of 179 countries)
Sudan
Yemen
Egypt
oPt
Syria
Jordan
Lebanon
Saudi Arabia
Oman
Qatar
Bahrain
180
160
140
120
100
80
60
40
20
0
UAE
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Kuwait
Human Development Index (HDI)
Diverse ESCWA Membership
Source: UNDP 2008
Data on Iraq N/A
• Varied level of Economic & Technological Development
• Unequal progress towards MDGs
• Unequal impact of Financial Crisis on sub-regions
Impact of Crisis on GDP & Oil Price
GDP GROWTH (%)
OPEC OIL PRICE (USD)
$160
7
6
5
4
3
2
1
0
$140
$120
$100
$80
$60
$40
ESCWA
GCC
More
Region Countries Diversified
2008
2009 Countries
$20
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Trend:
May 2007 – May 2009
Key Messages:
• GDP expected to fall from 6.1% to 2.1%
• Demand for Oil expected to remain low despite price drop
• Inflation expected to drop from 12 % in 2008 to 6 % in 2009.
Impact of Crisis on key Sectors
Trade & Foreign Direct Investment (FDI): :
• GCC: Export revenues to decrease b/c oil
• Non-GCC: affected by recession in EU and US
• Expected Significant decrease in FDI inflows (-21%
in 2008)
Stock Markets and Banking Sector:
• Indices declined sharply by
50% in 2008,
continuing trend in 2009
• Banks remain well capitalized & ratio of nonperforming loans to total is less than 5%
Impact on Unemployment & Poverty
Poverty :
• Relatively low $1/day poverty rates but significant at $2/day
• Remittances to contract in 2009 due to loss in employment
and falling real wages – impact on household poverty.
Unemployment:
2007
2008p
Change in 2009
Scenario 1
Scenario 2
Scenario 3
Unemployment Rate (%)
World
5.7
5.9
6.5
6.8
7.4
Middle East
9.5
9.0
8.8
9.3
11.0
North Africa
10.6
10.0
9.8
10.9
11.1
VULNERABLE EMPLOYMENT ( Share of total employment (%))
World
50.4
49.4
48.9
50.5
52.8
Middle East
33.4
32.8
32.6
33.7
39.3
North Africa
37.6
36.8
36.4
40.7
42.4
Source: ESCWA-ILO (June 2009)
National Responses
Fiscal policies: to boost domestic and global demand
• GCC governments have announces large programmes of
investment in infrastructure and real estate;
• More diversified countries also announced fiscal stimulus
packages – including through construction projects.
Monetary & banking policies: to maintain liquidity
• GCC Central Banks cut investment rates & lowered reserve
requirements
• Sovereign wealth funds (SWFs) focus on injecting liquidity
Social Protection: to cushion impact on most vulnerable
• Few effective social safety net measures in place, such as
social assistance programmes, to deploy or scale up
targeted support to the poor;
Regional Responses
• League of Arab States’ Economic,
Development and Social Summit (Kuwait,
January 2009)
• OPEC Meeting (Vienna, March 2009)
• Arab Economic Forum (Beirut, April 2009)
• ESCWA-ILO High Level Conference on
the Financial and Economic Crisis
(Damascus, May 2009)
The Damascus Declaration (May 2009)
Key Recommendations to Member Countries:
•
Adopt sustainable expansionary fiscal policy to
boost domestic demand;
•
Support the private sector, esp. SMEs;
•
Enhance efficiency of regulatory frameworks in
the financial sector to serve real economy;
•
Encourage national, regional & international
funds, as well as sovereign wealth funds, to
provide liquidity and increase investments;
•
Diversify exports, investing in technology &
facilitate intra-regional trade flows.
ESCWA Role in Promoting Development
A. Support Evidence-Based Policy Making
- Contribute to the availability of relevant and
accurate data (disaggregated by age, gender, etc.)
- Provide analysis and policy recommendations
B. Promote Regional Integration for coherence
in addressing the impacts of the Crisis
C. Encourage South-South Cooperation
D. Promote Public-Private Partnerships, and
linkages with Civil Society & Academia
THANK YOU