Arab Spring: An economy of optimism

Posted on July 18, 2011

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Will political change deliver accountability? Will that translate to economic growth?

As Tahrir Square continues to be the gathering ground for public opinion in Egypt, the challenges of creating an equitable political environment have come into sharper focus. With a high probability of a gridlocked political environment in the countries wracked by revolution, there is every reason to fear that reform will be diluted by the conflict between the forces of Arab Spring and those vehemently opposed to it. As a consequence, economic growth in the nations concerned may continue to lag behind global averages, failing to fulfill the aspirations of the people.

The questions remain: Will some of these countries shift to a hybrid form of governance that lies somewhere in between democracy and authoritarianism? Will political change deliver genuine accountability? Will the MENA nations continue a sub-global-average economic growth trend that they have witnessed since 1980?

The Economist Intelligence Unit is not very optimistic. According to EIU analysts, who used a long-term growth model over 40 years, the results do not bode too well for regional economies. Under an EIU model of limited political change or the survival of authoritarianism, average growth in GDP per head in MENA in 2010-50 would at best equal the expected global average over this period of about 3%. That means that in 2050, average income in MENA would still be about 60% of the global average, as it is today.

Analysts are tasked with exploring all scenarios – worst case, base case and best case. Which of these scenarios becomes reality depends entirely on how events are controlled and channeled. The challenges before the MENA states are clear: Improve the quality of policy-making and policy-implementation institutions, decease trade barriers, reduce dependence on primary exports such as hydrocarbons. Functioning democratic systems can go a long way towards building a strong foundation for accelerated economic growth.

More intelligence on Arab Spring and the economy:

 

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Posted in: Economy