A broad consensus is emerging that while the Middle East has
survived the global crisis far better than other regions, there
are big challenges remaining, especially in containing
unemployment and poverty.
The IMFs World Economic Outlook projects that
regional growth will fall from 5.4% in 2008 to 2% in 2009,
before rebounding to 4.2% in 2010. Similar forecasts are
expected to be used in the Funds Middle East Regional
Economic Outlook, to be launched on Sunday in Dubai.
Shamshad Akhtar, the World Bank vice-president for the
Middle East and North Africa (MENA), has been particularly
active in Istanbul in highlighting the regions relatively
high unemployment. The bank projects joblessness to rise in
2009/10 by 25% in the Middle East and 13% in North Africa,
despite growth second only to Asia.
The message, globally, is that, yes, there are signs
of recovery, but it [the situation] hasnt settled
deeply, Akhtar told Emerging Markets. We
[in MENA] already had 20 million people unemployed, and we have
new entrants to the labour force [due to high population
growth], so we have a problem.
Akhtar warned that a disproportionate number of people,
especially in Egypt and Morocco, were hovering just above the
$2-a-day income threshold for poverty, meaning that the region
could ill afford complacency over the knock-on effects of
This was the major factor behind the banks increased
lending in MENA from $1.8 billion in 2008/09 to more than $3
billion in 2009/10, she said.
Demand is steep, she said. Three billion
dollars is lower than existing demand for development-policy
lending. Our clients tell us they need [to finance] reforms
and not just at macro level. Countries want to
strengthen their financial structures, they want more
micro-finance. They want affordable mortgages and pension
reform. They want to restructure social safety nets.
The World Banks 2009: Economic Developments and
Prospects, which it launched last week in Istanbul, drew
attention to the opportunity presented to
governments by the economic crisis to ease infrastructure
bottlenecks and restructure ineffective yet expensive
Mohsin Khan, the IMFs former Middle East chief, told
Emerging Markets in a telephone interview that
governments had much still to analyse in their management of
the economic crisis.
He said the clearer changes over the past year
in the Middle East had been in monetary rather than fiscal
The regions monetary reaction to the crisis was
unprecedented, explained Khan, Senior Fellow at the
Peterson Institute for International Economics in Washington.
Back in 2007, there was a lot of worry about the
inflation rate. There was talk of reining in monetary
expansion, the revaluation of exchange rates ... that has
They are mirroring what the advanced countries have
done lowering interest rates, which are now very
Fiscal policy had been less innovative, he added. The
[fiscal] stimulus was already in the works when the problems
arose. There were big infrastructural projects in the Gulf: the
economic cities, the Dubai metro - and they werent scaled
back. The stimulus was in the works anyway.
Khan added that while inflation was picking up
in some countries he cited Egypt, where a rise to 16.2%
in 2009 from 11.7% in 2008 is projected by the IMF it
would not become a big problem in the near future.
A large part of the inflationary pressure was
structural commodity prices and house prices, and not to
do with monetary policy, he said. A more pressing issue,
he added, was corporate over-borrowing in the Gulf.