Arab Spring Assessment

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NS3040 Fall 2014

• Arab Spring Assessment
• Dr. Robert E. Looney
• relooney_at_nps.edu

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Arab Spring Overview I

• Arab spring resulted in increased political
  pluralism and new democratic institutions but led
  to
• Instability
• Setbacks in the transition towards democracy
• Mass protests
• Clashes among former revolutionary allies and
• The rise of political Islam
• Instability taken a toll on the regions
  economies
• Sharp slowdown in economic activity
• Deteriorating external and fiscal accounts
• Decreasing reserves
• Inflationary pressures in some countries

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Arab Spring Overview II
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MENA Split I
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MENA Split II
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Arab Spring Impacts I

• Long term challenges remain as pressing as ever
• High unemployment (especially among youth)
• Inefficient subsidy regimes
• Low trade diversification
• Main impacts of Arab Spring
• Sharp drop in growth, slow recovery underway
• Average real growth in region fell from 4.2 in
  2010 to 2.2 in 2011 lowest in a decade
• Making matters worse,
• global economy sluggish
• Eurozone crisis hit region hard given tight
  economic links

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Arab Spring Impacts II

• Slowdown affected all countries
• Hardest hit initially were those countries at
  center of the Arab Spring
• Libya
• Tunisia
• Egypt
• Syria, and
• Yemen
• Morocco was only country were GDP strengthened in
  2011
• Economic recovery subdued in 2012
• Average real GDP growth increased slightly to
  2.4
• In 2013 should increase to 3.5 but remain below
  pre-revolutionary growth rates.

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Arab Spring Impacts III

• Production stoppages caused by political upheaval
  were severe.
• In Libya oil production decreased from 1.65 m bpd
  in 2010 to only 0.47 m bpd in 2011
• In Egypt widespread demonstrations and strickes
  paralyzed production process and deterred
  investments for months
• In Tunisia labor unrest lead to a substantial
  decline in mining sector (-40 va) and oil and
  phosphate production.
• In Syria oil production declined by 60 from
  level at end of 2010 to 0.16 m bpd in September
  2012 sanctions and ongoing civil war
• In Yemen economic activity hit by attacks on
  electricity facilities and pipeline sabotage
  led to severe energy shortages.

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Arab Spring Responses I

• Aid-Assistance
• To avoid a balance of payments crisis,
  international community stepped in to support the
  region
• G8 and the international financial organizations
  founded the Deauville Partnership in May 2011
  to coordinate aid to afflicted countries
• Members pledged up to USD 70 billion
• To date only a fraction of promised aid has been
  disbursed
• IMF has also committed to provide loans to
  Morocco (6.2bn), Jordan (2bn), Yemen(93mn) and
  Egypt (4.8bn).

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Arab Spring Responses II

• Governments in region responded to political
  unrest and weakening of economic performance by
  increasing public spending
• Highest increases in government expenditures
  relative to GDP Tunisia and Algeria
• Most fiscal measures aimed at sustaining social
  cohesion and mitigating effects of high food and
  fuel prices
• Popular steps
• Increase subsidies on energy and food
• Raise public sector wages and pensions
• Expand unemployment benefits

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Arab Spring Challenges Ahead I

• Youth unemployment, skills mismatch
• MENA region faces structural employment gap
  especially among younger workers
• Regional unemployment rates around 10
• Youth unemployment closer to 30

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Arab Spring Challenges Ahead II

• Labor market inefficiencies a key problem in the
  region
• MENA lowest score in the WEF Global
  Competitiveness Index for labor market efficiency
• Region also faces widespread skill mismatches
  inefficient education systems produce unprepared
  market entrants
• Firms operating in region regularly list
  insufficient labor skills as a major constraint
• Public sector accounts for an outsized portion of
  employment in region
• 9.8 compared to global average of 5.4
• Taking only non-agricultural employment in 2010,
  public sector accounted for 70 of labor force in
  Egypt

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Arab Spring Challenges Ahead III

• Region generally scores very low on World Bank
  Ease of Doing Business Index even lower after
  2011 yet the private sector will have to create
  most of the jobs.

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Overall Assessment I

• At this point in time a number of generalizations
  are possible concerning the Arab Spring
  phenomenon
• 1. The Arab Spring was caused in part by economic
  underperformance and exclusion
• 2. The uprisings ushered in new hope that
• The economies of the region could be transformed
• In ways that would provide greater and more
  widely shared opportunities for their people
• Economic Performance
• 3. Most transition countries have experienced a
  deterioration or stagnation in economic
  performance
• 4. The extent and duration of such deterioration
  has varied by country
• Libya recovered more rapidly due to oil revenues
• Yemen supported by grants from Saudi Arabia
  stabilized quickly, but with many problems
  remaining

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Overall Assessment II

• 5. The economic conditions in transition
  countries have been and will continue to be
  affected to different degrees by combination of
  domestic and external factors
• Political uncertainties and tensions
  investment, tourism
• Weak global growth and Eurozone crisis --
  exports
• Increases in global commodity prices -- food
• Regional spillovers -- refugees
• Reform Agenda
• 6. A number of reforms needed to stabilize
  economies and deliver grater economic
  opportunities
• Progress in the critical governance area slow or
  non-existent
• More progress in macroeconomic stabilization but
  wealth created at micro level and little reforms
  in areas like labor markets, business environment