Supporting Arab Economies in Transition
Carnegie Endowment | Sinan Ulgen | 7.6.12
In 2011 in a number of oil-importing Arab countries, due in large part to radical changes in political structure that hindered forward-looking economic decisionmaking, economic activity slowed sharply—investment, consumption, and tourism were all affected—and unemployment rose. Across the Middle East and North Africa, real GDP grew half as fast in 2011 (2.2 percent) as in 2010 (4.3 percent). As a result, except in Morocco, per capita incomes stagnated or decreased in 2011, and more young people are without jobs today than a year ago.
Many Arab governments also have less room for policy maneuver due to worsening fiscal and external balances. Reflecting slowing growth and increased popular demands, the average fiscal deficit across the Middle East and North Africa mushroomed in 2011 to about 8 percent of GDP; government borrowing on such a scale, in turn, is crowding out lending to the private sector.