Middle East Risks More Unrest, Needs to Address Jobs, IIF Says
Countries in the Middle East and North Africa, where popular uprisings led to political changes, face the risk of renewed turmoil if governments fail to take the measures to help create jobs, a banking industry group said.
“Among the populations of countries such as Egypt, Tunisia, Jordan and Morocco, expectations are that change will bring about a revival of growth that will be more widely shared, improved job opportunities and, in general, a better life,” the Washington-based Institute of International Finance said in a report on the region released today. “There is a real risk of a second wave of protests if the prospects for improvement in living conditions remain dim.”
Unrest in the region that holds more than half the world’s oil began with protests in Tunisia against high unemployment and political repression, which forced President Zine El Abidine Ben Ali from power in January. It spread to Egypt, where Hosni Mubarak was toppled in February, and other countries including Libya, Yemen and Bahrain.
The IIF, an industry group that represents some of the world’s largest commercial banks and financial firms, expects the economy of oil-importing countries in the region as a whole to contract 0.5 percent this year, before expanding 4.2 percent in 2012. Tunisia will shrink 1.5 percent this year and Egypt 2.5 percent, according to the IIF.
For governments of transition and their successors, “given the relatively large size and low productivity of public sectors in the region, the reform agenda would need to focus on creating the legal and institutional environment for fostering entrepreneurship, investment, and market-driven growth,” the IIF wrote in the report.
Tunisia, Egypt
Such a package of measures to be implemented over the next few years should be part of financial aid by international institutions or bilateral donors, the IIF said. Both Tunisia and Egypt have been in contact with the International Monetary Fund and the World Bank about their potential needs.
The organization forecasts that growth in the Gulf Cooperation Council, which includes Saudi Arabia and the United Arab Emirates among its six members, will accelerate to 6.5 percent this year before slowing to 4.3 percent in 2012. It sees expansion of 5.2 percent this year and 6 percent next year in oil exporting countries that don’t belong to the GCC, such as Algeria.
The projections are based on average Brent oil prices of $115 a barrel in 2011 and $110 a barrel in 2012. Brent crude for June settlement slid $1.21, or 1.2 percent, to $124.50 a barrel on London’s ICE Futures Europe Exchange yesterday.
To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net
To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.
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