Transcript Arab-Spring Assessment

NS3040 Fall 2014
Arab Spring Assessment
Dr. Robert E. Looney
[email protected]
Arab Spring Overview I
• Arab spring resulted in increased political pluralism and
new democratic institutions but led to:
• Instability
• Setbacks in the transition towards democracy
• Mass protests
• Clashes among former revolutionary allies and
• The rise of political Islam
• Instability taken a toll on the region’s economies
• Sharp slowdown in economic activity
• Deteriorating external and fiscal accounts
• Decreasing reserves
• Inflationary pressures in some countries
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Arab Spring Overview II
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Ranking -- Legatum Governance (1 highest, 142 lowest)
MENA Split I
140
Iraq
Yemen
120
100
Syria
Egypt
Morocco
80
Tunisia
Jordan
60
Saudi Arabia Kuwait
40
20
0
0
20
40
60
80
100
120
140
Ranking -- Legatum Social Capital (1 highest, 142 lowest)
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Ranking -- Legatum Social Capital (1 highest, 142 lowest)
MENA Split II
140
Syria
Yemen
Tunisia
120
Egypt
100
Iraq
Jordan
80
60
Kuwait
40
Saudi Arabia
Morocco
20
0
0
20
40
60
80
100
120
140
Ranking -- Legatum Entrepreneurship (1 highest, 142 lowest)
5
Arab Spring Impacts I
• Long term challenges remain as pressing as ever:
• High unemployment (especially among youth)
• Inefficient subsidy regimes
• Low trade diversification
• Main impacts of Arab Spring
• Sharp drop in growth, slow recovery underway
• Average real growth in region fell from 4.2% in 2010 to 2.2% in
2011 – lowest in a decade
• Making matters worse,
• global economy sluggish
• Eurozone crisis hit region hard given tight economic
links
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Arab Spring Impacts II
• Slowdown affected all countries
• Hardest hit initially were those countries at center of the
Arab Spring
• Libya
• Tunisia
• Egypt
• Syria, and
• Yemen
• Morocco was only country were GDP strengthened in
2011
• Economic recovery subdued in 2012
• Average real GDP growth increased slightly to 2.4%
• In 2013 should increase to 3.5% but remain below prerevolutionary growth rates.
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Arab Spring Impacts III
• Production stoppages caused by political upheaval were
severe.
• In Libya oil production decreased from 1.65 m bpd in
2010 to only 0.47 m bpd in 2011
• In Egypt widespread demonstrations and strickes
paralyzed production process and deterred investments
for months
• In Tunisia labor unrest lead to a substantial decline in
mining sector (-40% va) and oil and phosphate
production.
• In Syria oil production declined by 60% from level at end
of 2010 to 0.16 m bpd in September 2012 – sanctions and
ongoing civil war
• In Yemen economic activity hit by attacks on electricity
facilities and pipeline sabotage – led to severe energy
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shortages.
Arab Spring Responses I
• Aid-Assistance
• To avoid a balance of payments crisis, international
community stepped in to support the region
• G8 and the international financial organizations founded
the “Deauville Partnership” in May 2011 to coordinate aid
to afflicted countries
• Members pledged up to USD 70 billion
• To date only a fraction of promised aid has been disbursed
• IMF has also committed to provide loans to Morocco
($6.2bn), Jordan ($2bn), Yemen($93mn) and Egypt
($4.8bn).
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Arab Spring: Responses II
• Governments in region responded to political unrest
and weakening of economic performance by
increasing public spending
• Highest increases in government expenditures
relative to GDP – Tunisia and Algeria
• Most fiscal measures aimed at sustaining social
cohesion and mitigating effects of high food and fuel
prices
• Popular steps –
• Increase subsidies on energy and food
• Raise public sector wages and pensions
• Expand unemployment benefits
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Arab Spring: Challenges Ahead I
• Youth unemployment, skills mismatch
• MENA region faces structural employment gap –
especially among younger workers
• Regional unemployment rates around 10%
• Youth unemployment closer to 30%
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Arab Spring: Challenges Ahead II
• Labor market inefficiencies a key problem in the region
• MENA lowest score in the WEF Global Competitiveness
Index for labor market efficiency
• Region also faces widespread skill mismatches –
inefficient education systems produce unprepared
market entrants
• Firms operating in region regularly list insufficient labor
skills as a major constraint
• Public sector accounts for an outsized portion of
employment in region
• 9.8% compared to global average of 5.4%
• Taking only non-agricultural employment in 2010, public
sector accounted for 70% of labor force in Egypt
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Arab Spring: Challenges Ahead III
• Region generally scores very low on World Bank’
Ease of Doing Business Index – even lower after
2011 – yet the private sector will have to create most
of the jobs.
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Overall Assessment I
At this point in time a number of generalizations are possible
concerning the Arab Spring phenomenon:
• 1. The Arab Spring was caused in part by economic
underperformance and exclusion
• 2. The uprisings ushered in new hope that
• The economies of the region could be transformed
• In ways that would provide greater and more widely shared
opportunities for their people
• Economic Performance
• 3. Most transition countries have experienced a deterioration or
stagnation in economic performance
• 4. The extent and duration of such deterioration has varied by
country
• Libya recovered more rapidly due to oil revenues
• Yemen supported by grants from Saudi Arabia stabilized quickly,
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but with many problems remaining
Overall Assessment II
• 5. The economic conditions in transition countries have
been and will continue to be affected to different degrees
by combination of domestic and external factors
• Political uncertainties and tensions – investment, tourism
• Weak global growth and Eurozone crisis -- exports
• Increases in global commodity prices -- food
• Regional spillovers -- refugees
• Reform Agenda
• 6. A number of reforms needed to stabilize economies
and deliver grater economic opportunities
• Progress in the critical governance area slow or non-existent
• More progress in macroeconomic stabilization but wealth
created at micro level and little reforms in areas like labor
markets, business environment
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