How unemployment is crippling Arab state economies
In its latest report, the International Monetary Fund has slashed economic outlooks for three major states
Dubai — Unemployment and sluggish economic growth are fuelling social tension and protests in several Arab countries, the International Monetary Fund (IMF) said on Monday.
The unrest is in turn contributing to slower growth in the Middle East and north African region, adding to that are global trade tensions, oil price volatility and a disorderly Brexit process, the IMF noted in its regional economic outlook.
Earlier this month the IMF lowered the 2019 forecast for the region, forecasting a meagre 0.1% growth from an expected 1.1% uptick for the Arab nations and Iran.
The IMF also slashed its outlook for the region’s three largest economies — Saudi Arabia, Iran and the United Arab Emirates.
The risks around the forecast “are skewed to the downside and are highly dependent on global factors”, the IMF said in its report.
“The level of growth that countries in the region are having is below what is needed to address unemployment,” said Jihad Azour, the IMF’s director for the Middle East and Central Asia.
“We are in a region where the rate of unemployment at the youth level exceeds 25%-30% and this requires growth to be higher by 1%-2%” to make a dent in joblessness, Azour said in an interview.
The IMF reported that the high unemployment rate was worsening social tension in Arab countries.
“Unemployment averages 11% throughout the region versus 7% across other emerging markets and developing economies.
“Women and young people are particularly likely to be out of work, with more than 18% of women ... without jobs in 2018,” it said.
Violent protests have broken out in several Arab countries since early 2010 and turned into bloody civil wars in Syria, Yemen and Libya.
A new wave of demonstrations erupted over the past year in Algeria, Sudan, Iraq and Lebanon, typically demanding economic reforms and action against corruption.
In Lebanon, where protesters have brought the country to a standstill with demands for a full overhaul of the political system, the economy grew at a very slow pace over the past few years, Azour noted.
“The government has to act firmly and swiftly to address those imbalances, bring confidence back by addressing the fiscal situation, and lower expenditure,” he said.
The IMF also said that public debt levels were very high in many Arab countries, exceeding 85% of GDP on average, with rates of more than 150% in Lebanon and Sudan.
“Having built over many years, the cost of public debt burdens has become sizeable, preventing investments critical to the region’s long-term economic future,” it said.
The IMF said that Iran, which is subject to crippling US sanctions, has entered a steep economic recession and faces a battle against spiralling inflationary pressures.
The Islamic republic’s economy is projected to contract by 9.5% this year after posting negative growth of 4.8% in 2018.
Iranian authorities must align “the exchange rate close to the market rate and also reform the financial sector ... and try to address some of the implications of the high level of inflation”, said Azour.
As a result of the sanctions, Tehran is believed to be exporting only about 500,000 barrels a day of crude, down from more than 2-million barrels a day before the sanctions.
The IMF said that oil-rich Gulf Co-operation Council (GCC) states, led by Saudi Arabia, are expected to grow by just 0.7% in 2019 from 2.0% in 2018 due to lower oil prices and output.
“GCC economies need to diversify and grow out of oil and this requires them to accelerate the reforms that have been started in the last four to five years,” Azour said.