Economics of development in MENA region

16 Aug 2015

The transformation in the Middle East presents a historic opportunity for the Arab countries in transition as they rethink not only their political but also their economic systems. Maintaining economic stability depends on modernizing and diversifying the region’s economies, creating more jobs, and providing fair and equitable opportunities for all. According to a research report, the Arab countries in transition have long suffered from a lack of dynamism, with high unemployment and the responsiveness of employment to growth has been among the most sluggish in the world. This scenario has slowly changed with the increase in the number of entrepreneurs in the region. The world has a vested interest in the success of the Arab Spring. If the change does not put the Middle East on the path to prosperity and democracy, increased instability and extremism will wash onto Western shores.

Increase in trade is equally important for nations in the region to bring about a boost in their economy. For this a better and more involved trade integration is the only way to boost the region’s economies, creating growth and jobs and helping maintain the momentum for broader reform. Arab nations also historically have known to complicate business with their traditional approach. As a result, it is often a lengthy, expensive, and complicated proposition to start and run a business. The new generation of entrepreneurs and businessman have started to adopt a simpler form of conducting business which is more open and adaptable. The region clearly has the potential for private sector growth. In the past decade, the opening up of economies and the influx of new technologies and capital born of high oil prices nurtured the growth of small and medium-sized enterprises. The result of the escalation in private sector activity has been the birth of a small but growing middle class.

As per the IMF, the MENA countries have experienced several decades of steady, if unspectacular, financial deepening—that is, increasing importance of the financial sector in the economy. Although banking systems in emerging market and developing economies, on average, had roughly the amount of private sector credit that would be expected from their structural characteristics; the MENA banking systems have consistently underperformed.

The specifics will vary, but there are key common elements that respond to shared concerns. All must embark on this process with urgency, to build a shared national vision of how the economic framework will evolve and reassure hesitant investors on the future rules of engagement, thus accelerating the delivery of results that will sustain popular support for economic and social progress. The MENA region is at a historic juncture. Beyond the challenges of political transition, the economic objectives are quite clear: raise the rate of economic growth, create more jobs, and ensure that economic growth is more inclusive.

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