Global Arab Network - Six months have passed since the Tunisian vegetable street hawker Mohamed Bouazizi set himself ablaze starting a region wide revolution that has toppled the Presidents of Egypt and Tunisia with the leaders of Yemen and Libya are following fast. The wave of protests swept through Bahrain, Jordan and Syria.
Revolutions and uprisings are unpredictable and can have unforeseen consequences. Trade and industry grind to a halt. Tourism dries up. The economy in general stagnates and normal economic life ceases to function.
Add to this the high cost of disruptions, strikes, civil war in Libya and the exodus of the foreign workers and the flight of inward investments.
People demonstrated against high food prices, high unemployment and corruption which in turn impede economic development. The young people are particularly badly hit by lack of job prospects and economic progress. Unemployment in the region among the young is very high. According to economic experts unemployment in Syria is 25% but the government own figures show that unemployment is only 11-13% but most observers believe the experts and don’t believe the government. In Egypt 90% of the unemployed are young people (age 15-24).
The combined current account deficit of Egypt, Syria, Yemen, Morocco, and Tunisia is in excess of $15 billion. To plug the gap external financing is needed. The combined oil import bill for the non-oil Arab countries will have to be covered by the international community through the mechanisms of the IMF and the World Bank.
Egypt for example needs economic aid to cover the shortfall in its budget over the next 2-3 years. The losses from the Tahrir Square protests were estimated to be around 1.7 Billion US Dollars. The tourism sector which is an important component of the economy suffered a 45% decline in Egypt and Tunisia since the wave of protest began. In Syria tourism has dried up completely. Even neighbouring Lebanon is feeling the impact of a weaker tourist activity. It is expected that during 2011 Egypt’s economy will shrink by 2.5 to 3% and Yemen’s by more than 4%. It is worth mentioning that Egypt stock market has declined by 25%.
The World Bank promised to grant Egypt two billion USD over the next two years and to provide a loan of 2.5billion USD.
The other aspect of this economic downturn is that wealthy Arabs are transferring their funds to Europe and North America. It is an undisputed fact that investors are nervous and afraid of uncertainty. One Arab newspaper estimated that some $30 billion has left Egypt since the onset of the Arab Spring.
In the short term we shall witness a reduction in production, a decline in trade services and other economic activities. Non oil producing countries will be particularly hit. In the most general terms it can be said that the economies of the non-oil countries are on the verge of collapse and are semi-bankrupt.
On the plus side the high oil prices have helped to cushion the economies of the members of the Gulf Co-operation Council. Saudi Arabia is investing $130 billion to finance low cost housing projects, salary increases for Public Sector employees and increased investment in education and social services.
The World Bank believes that if the transfer to democracy is peaceful and sound, we should have economic growth in the years 2012/2013 of 3.5 to 4.5%. Economic growth in 2011 was 1.9%. Experts predict an upturn in economic activity in the years 2012-2014 with the expansion of the financial sector.
Reforms in education and the introduction of literacy programs are urgently needed. In Egypt only 15% of women and 70% of men are literate. Fighting of corruption must accompany political and social reforms. There is a great need for urgent economic reforms to reap the benefits of the political reforms. Global Arab Network
nehad ismail, London based commentator on Middle Eastern Affairs