JEDDAH – The uprisings currently taking place in the Middle East and North Africa (MENA) region, together with their political and economic repercussions, have made it the focus of world attention. However, MENA countries differ significantly from one another in many respects, for example in their economic structures, in the size of their populations, and in their political and institutional frameworks. As a consequence, the economic repercussions of the uprisings are likely to differ between countries, a recent study on the economic impact of the uprisings in the MENA Region sponsored by Western Union said. Nevertheless, despite such differences, MENA countries share some common attributes: all began to liberalize their economies during the 1990s (albeit to different extents), and in all of them, the government still plays a dominant role. Migration and remittances are of importance to all MENA countries, regardless of whether they are sending or receiving countries, and have played a crucial role in combating the effects of unemployment and macroeconomic imbalances. Unemployment, which was a key factor behind the revolutions in Egypt and Tunisia, remains a major problem in most MENA societies, notably in non-Gulf Cooperation Council (GCC) countries, and carries a range of social, economic and political consequences. All post-uprising development plans are expected to prioritize job creation. The effects of oil and natural gas prices differ significantly among MENA countries and so affect labour markets, migration and the financial sector in different (and sometimes in opposite) ways. The recent oil and gas price increases have been positive for GCC countries, as well as for Libya, Yemen, Iraq, Algeria and Sudan. However, they have had a negative impact on the other MENA economies, the extent of which has differed according to each country's level of oil imports and domestic fuel subsidies. All MENA economies have embarked on financial sector liberalisation and development, the extent of which varies greatly from one country to another. However, the region as a whole remains relatively unintegrated into the world economy, as indicated by its low market-capitalisation ratio, and so it has had only limited exposure to the international financial crisis. Moreover, the financial sector in MENA countries remains highly dependent on the banking system; corporate bonds markets are underdeveloped and MENA economies have only very limited ability to respond to the financing needs of small and medium-sized enterprises (SMEs). As MENA countries have different economic structures, the channels by which an economic crisis or shock affects them vary significantly. Although the GCC countries are mainly affected through the financial sector, this is not the case for non-GCC and non-oil MENA countries, where the impact is mainly through the real sector. The differences in economic structure imply also that shocks affect the MENA economies differently: an upsurge in oil prices benefits the GCC and other oil exporters, whereas it has a negative impact on oil importers. In relative terms, however, the financial crisis and the oil and food price increases have had only mild effects on MENA economies, owing to their limited integration into the world economy. Migration and remittances within MENA were not strongly affected by the 2008-09 financial crisis and reverted to their normal status within a short time. Both are of paramount importance in MENA countries, owing to their close relationship with labour-market conditions and employment levels, which are crucial issues from political, social and economic perspectives. Labour-market conditions in the MENA region are especially vulnerable to the impact of an economic shock, as unemployment rates are high. A number of factors determine the ability of MENA countries to respond to the current upheavals, as was the case in the 2008-09 financial crisis. These factors include: the risk of fiscal unsustainability (in Sudan and Yemen); relatively weak private sectors and inflexible labor-market conditions (common to all MENA economies); high unemployment rates associated with weak automatic stabilizers (such as low wages and limited social security/unemployment benefits); and relatively shallow financial sectors (low market-capitalization ratios and weak corporate bonds markets). These weaknesses tend not to be as prevalent in the economies of major oil exporters, and hence they have a greater ability to withstand economic shocks. The current upheavals are expected to have similar effects to the 2008-09 crisis for the labor markets, migration and remittances transmission, although to a different extent and with different implications. Labor markets in the countries that are experiencing revolutions face major disruptions, with increasing rates of unemployment arising from weak production conditions, lack of security and a disturbed business environment (including a credit squeeze and higher costs of finance). Disruption is exacerbated in some countries by large-scale return of migrants, including Egyptian and Tunisian migrants from Libya (and, to a lesser extent, Yemen). Moreover, the impact of higher oil prices on major oil exporters and importers in the Arab region is likely to be similar to that experienced previously, allowing major oil exporters to accumulate reserves while negatively affecting net oil importers, especially their balance of payments and government budget deficits. – SG
