Revolutions in the Arab World
Political changes in the Arab world could boost the region's economies in the long term through inclusive reforms that would render them more dynamic, the
International Monetary Fund said Wednesday.
But oil-importing economies face pressure due to increased crude prices and disruption to economic activities, the IMF said in its Regional Economic Outlook report.
"The changes taking place in the region could provide a boost for its economies" over time, the report said.
"A more inclusive reform agenda that meets the populations demands by providing greater access to opportunity and more competition would make the economies more dynamic and leverage the regions inherent strengths," it said.
The strengths include "a young labour force and a privileged geographic position at the crossroads between major markets in Europe and fast-growing emerging and developing economies in Asia and sub-Saharan Africa."
In the near term, however, a wave of pro-democracy uprisings spreading across several Arab countries pose risks to the oil-importing economies, including the "possibility of spreading unrest, sharply higher oil prices, and rising fiscal deficits."
The IMF also warned that "further deterioration of investor confidence and associated capital outflows could leave governments short of needed financing."
Street protests have already swept away the two traditionally strong presidents of Tunisia and Egypt, while demonstrators in Yemen are keeping up determined protests to oust the long-serving President Ali Abdullah Saleh.
Almost all other Arab countries have seen uprisings and demands for political reforms.
The unrest has ranged from small demonstrations in ultra-conservative Saudi Arabia to a full-blown armed struggle in Libya where the West intervened militarily to protect civilians, backed by a UN Security Council resolution.
The IMF earlier this month revised its economic growth projection for the Middle East and North Africa region to 4.1 percent this year, down from a forecast of 4.6 percent made in January.
It said that spreading unrest was putting pressure on economic growth in several countries, mainly Egypt where economic growth is now projected to drop from 5.1 percent last year to just 1.0 percent this year.
"With this change comes the challenge of putting economies back on track, but also the opportunity to turn to a path of more inclusive growth," said the IMF in its latest report.
In addition to economic costs resulting from unrest, the economies of Egypt and Tunisia will also suffer from the effects of trouble in neighbouring Libya and the resultant return of more than 100,000 migrant workers, it said.
Both countries face a "virtual standstill in tourism and foreign direct investment" with fiscal deficits widening to a projected 9.7 percent of the gross domestic product in Egypt and 4.3 of GDP in Tunisia, it said.
It said expenditure in the two countries increased in response to growing needs and higher borrowing costs, while revenues suffered from lower economic growth and collection rates.
Meanwhile, countries of the oil-rich Gulf Cooperation Council (GCC) will continue to perform well, thanks to a surge in crude prices, except unrest-hit Bahrain.
"The performance of the GCC countries will remain strong in 2011, with the exception of Bahrain, where uncertainties prevail," it said.
Qatar's gas-rich economy is projected to expand by a massive 20 percent this year, compared with 16.3 percent in 2010. Growth in Qatar has been revised upwards from 18.6 percent in October.
Growth in Saudi Arabia -- the largest Arab economy, has also been revised up to 7.5 percent this year, compared with 4.5 percent projected in October.