Challenges to Arab Spring economies
MOST of economies hit by the Arab Spring uprisings will recover slowly next year as they are grappling with high inflation and rising unemployment due to poor global conditions, the International Monetary Fund predicted in a report on Sunday.
In its twice-yearly outlook for the Middle East and North Africa, the global lender said a partial return of political stability could permit somewhat faster growth in the combined output of Egypt, Jordan, Morocco, Libya, Tunisia and Yemen during 2013. But weak demand in Europe and other regions will weigh on the Arab Spring states.
These new democracies face shrink in exports, their growth is expected to remain below long-term trends and unemployment is expected to increase owing to continued anaemic external demand, high food and fuel commodity prices, regional tensions and policy uncertainty. The GDP in the six countries combined would expand by 3.6 percent next year, accelerating from an estimated 2.0 percent this year and 1.2 percent in 2011. In 2010, the year before the uprisings, GDP grew 4.7 percent. Because of sluggish global demand, the group’s current account balance of trade in goods and services will improve only marginally next year, to a deficit of 4.6 percent of GDP from this year’s 5.4 percent deficit. However some countries consider allowing greater flexibility in their exchange rates in order to stimulate exports, but did not specify which countries. The current understanding of governments’ underlying fiscal position and the risks to that position remains inadequate.
It was demonstrated by the emergence of previously unreported fiscal deficits and debts in the wake of the crisis in Greece and Portugal. It could also be seen in the US where financial problems in quasi-public enterprises, like Fannie Mae and Freddie Mac, remained largely out of sight until government bailouts. Elsewhere with large domestic banking sectors such as Iceland, Ireland, and the United Kingdom, the biggest shock to the public finances came from the crystallization of large, mainly implicit, government liabilities to the financial sector, it said. The these shortcomings in fiscal transparency were due to a combination of gaps and inconsistencies in existing fiscal reporting standards, delays and discrepancies in countries’ adherence to those standards, and a lack of effective multilateral monitoring of compliance with those standards.