The Middle East's Economic Outlook
On Monday, June 10, the Rafik Hariri Center for the Middle East hosted a public discussion on the economic challenges facing the region.
Hariri Center Deputy Director Tuqa Nusairat welcomed guests and framed the discussion. Dr. Jihad Azour, director of the Middle East and Central Asia department at the International Monetary Fund, then presented the findings of the IMF’s 2019 Regional Economic Outlook (REO) for the Middle East, North Africa, Afghanistan, and Pakistan. Dr. Azour emphasized four major factors impacting the region’s economics: slowed global growth (projected to drop from 3.6 to 3.3 percent this year); lower and more volatile oil prices; lower external demand, particularly from key trading partners (China, Europe, and Russia); and uncertain global financial conditions. Slow progress in improving employment rates since 2011 has fueled rising discontent as well as hindered growth. Dr. Azour outlined several fiscal and structural policy recommendations for both oil-exporting and oil-importing countries in the region. He advised that the former resume gradual consolidation, insulate the economy from oil shocks, strengthen fiscal institutions, improve business environment and governance, increase SME access to finance, and invest in human and physical capital. He advised that the latter also pursue growth-friendly consolidation, initiate targeted social transfers and restructuring and digitization of SOEs, increase exchange rate flexibility, improve access to credit and the business environment, and undertake product and labor market reforms.
The presentation was followed by a discussion between Dr. Azour and Hariri Center Nonresident Senior Fellow Dr. Mohsin Khan, who previously held Dr. Azour’s current position at the IMF. Their discussion examined other issues raised in the IMF report and the implications for MENA countries. In particular, the region faces more uncertainty due to geopolitical risks in North Africa and the Gulf, the rise of social tensions due to lower growth and reform fatigue, and oil dependency. Unemployment rates among women and youth especially concerning, although these groups are often very active in the informal economy. Dr. Khan pointed out that while the unemployment rate for primary school graduates is around 5%, the rate for university graduates is 30%, indicating that the region’s education systems are failing to teach marketable skills.
Dr. Khan opened the floor for audience questions, leading the panelists to discuss how transatlantic policymakers can respond to these developments in a way that delivers progress for people in the region. Given the trend of lowered oil prices, diversification is more urgent than ever; in the face of sluggish labor markets, governments and NGOs should encourage formal female labor force participation and improve market access; and the region’s leaders should focus on improving governance and reducing corruption in order to revive investment and make room for more social welfare spending. The panelists agreed that the opportunity to implement changes is fleeting and that policymakers should act now.