Political transition = Economic strain.Summary: The MENA region is going through a period of unprecedented change says the International Monetary Fund (IMF IMF
See: International Monetary Fund
See International Monetary Fund (IMF). ) as it unveils its Regional Economic Outlook Update at the Dubai International Financial Centre (DIFC DIFC Dubai International Financial Centre
The update, presented by Masood Ahmed Masood Ahmed is a fictional character in the popular BBC soap opera EastEnders. He is played by Nitin Ganatra. He is the husband of Zainab Masood and father of Shabnam and Tamwar. , Director of the IMF's Middle East and Central Asia Department and Dr Nasser Saidi Dr. Nasser Saidi is a Lebanese politician and economist who served as the Minister of economy and industry and the Vice-governor for the Lebanese central banks for several terms in the last decade of the 20th century. , Chief Economist at the DIFC highlighted the key factors threatening the economic health of the region.
The findings of the outlook update, titled "Middle East and North Africa: Historical Transition under Strain', which takes into consideration the near-term risks to the macroeconomic mac·ro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. stability of the Arab countries, shows that despite the strain of the transitions, growth is evident:
-GDP growth of regional oil exporters is expected to pick up in 2012to almost five per cent after recording four per cent growth in 2011
-GCC continues to be regional growth driver with GDP GDP (guanosine diphosphate): see guanine. growth projected at 5.3 per cent in 2012
-Average GDP growth of regional oil importers expected to recover to below 2.7 per cent in 2012, from 2.2 per cent in 2011
-The financial support of the international community is critical for regional oil importers
Dr Nasser Saidi, Chief Economist at DIFC says, "As the transitions taking place across the region continue, and with the depressed global environment, it is inevitable that economic growth will be impacted, even though the GCCand other oil exporters are continuing to benefit from high oil prices."
He identified the top five concerns:
1. Spillover spill·o·ver
1. The act or an instance of spilling over.
2. An amount or quantity spilled over.
3. A side effect arising from or as if from an unpredicted source: from the Euro zone crisis
2. Lower growth overall in Emerging Markets
3. Policy constraints
4. Risk of social unrest 5) Job creation
Dr Saidi says job creation is the clear economic and social policy priority and highlights the importance of having an inclusive agenda that supports and accelerates the growth of the private sector, notably SMEs and family businesses.
He adds, "I believe it is an opportune time to set up a dedicated Arab bank for reconstruction and development that could tailor solutions to the needs of individual nations in MENA, while catering for regional infrastructure projects that would support greater regional economic and financial integration."
Stabilisation is an immediate need, the IMF points out.
'But, at the same time, countries need to make tangible progress on transforming and modernising their economies.
Stepped-up job creation is vital.' Unemployment rates in the MENA region rank among the highest in the world, and populations will continue to grow over the coming decade.
'A piecemeal approach will not suffice to meet the challenge of generating high and inclusive growth that leads to sustainable job creation,' it adds.
The IMF says, 'In the Arab Spring countries, political transition, pressing social demands, and an adverse external environment have combined to increase the near-term risks to macroeconomic stability.'
It adds that while the risks were somewhat contained during 2011 but, with growth faltering, unemployment rising, and continued fiscal and external pressures, 2012 will be an equally challenging year.
Unemployment rates in the MENA region rank among the highest in the world, and populations will continue to grow over the coming decade Ahmed says, "Middle East oil exporters are benefitting from high oil prices, and we expect GDP growth to strengthen and become more broad- based this year. Nonetheless, fiscal vulnerabilities to falling oil prices have increased, and structural challenges remain, such as the need to create jobs for growing working-age populations and to further diversify the economies."
The outlook update says countries are faced with diminished policy space, having eaten into their foreign exchange and fiscal buffers during 2011. 'There is a risk that these developments could derail de·rail
intr. & tr.v. de·railed, de·rail·ing, de·rails
1. To run or cause to run off the rails.
2. the historic transition that is under way in these countries, and managing this risk is a shared international responsibility.'
Political transitions in a number of countries created uncertainty that weighed on investment, tourism, and overall economic activity during 2011.
In addition, MENA oil importers had to manage higher commodity prices, lower global growth, and negative spillovers from the Euro area and from within the region. As a result, (except in Morocco), per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals. incomes stagnated or contracted in 2011, and more young people are without a job today than a year ago.
'Governments responded to surging global commodity prices by higher spending-including on wages and food and fuel subsidies.'
The protracted political transition, lower global growth, and rising oil prices are likely to result in a slow and drawn-out economic recovery, with unemployment at best stabilising at high levels, the IMF says. Maintaining macroeconomic stability in this environment will be challenging, not least since policy buffers were reduced during 2011. Resolute action is needed to maintain macroeconomic stability and protect those hit hardest by the economic downturn. While many of the necessary reforms will take time to implement, first steps can-and need to-be taken immediately.
Governments must control spending (for example, by better targeting subsidies) while enhancing the effectiveness of social safety nets to protect the poor and vulnerable. Central banks will need to focus on maintaining external stability, which, in some cases, may require more exchange rate flexibility to mitigate external vulnerability.
MODERNISATION & TRANSFORMATION
Arab Spring countries need to set out on their own paths toward economic modernisation and transformation, the IMF adds. 'At the same time, the international community is called upon to provide financial support and technical and policy advice, as well as enhanced market access, to support homegrown reform agendas.' nBME
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