North Africa Faces Economic Challenges Following Arab Spring

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In the wake of the Arab Spring, North Africa is experiencing tough economic times. Mohammad Sharki examines the main challenges to economic reform, and doubts whether the governments in this region are capable of addressing all relevant issues.

Analysts believe that North Africa, where the Arab spring began two years ago, will be experiencing tough economic times next year as it tries to evaluate the effectiveness of reforms and allow the youth and vulnerable groups to reap the benefits of growth. This comes after these nations have restructured state institutions and adopted new constitutions, laws and modes of governance.

The International Monetary Fund (IMF) has predicted that North Africa will achieve a higher growth rate in 2013, after a decline of 2-3% this year. This is due to the unstable situation in the countries that participated in the Arab spring — particularly Tunisia and Libya — and as a result of decreasing foreign investment and tourism revenue. The decline is also related to the European financial crisis, as well as to high current-account deficits and external-payments deficits, as is the case in Morocco, a country that hopes to achieve a target of 4.5% growth and to bring its deficit below 5% in the next year.

Although North Africa is not homogeneous in terms of its income sources, the oil states will still enjoy larger shares of revenue, given that they depend on their energy exports — which experts have estimated to be approximately $100 per barrel. This would raise incomes from oil and gas revenues to more than $400 billion. In contrast, non-oil states — such as Morocco, Tunisia and Mauritania — will achieve an acceptable level of growth that exceeds 4% by depending on other sources such as agriculture, fishing, tourism, export industries and investment flows. This would help them reduce their budget deficits and create more job opportunities for the youth.

The Maghreb region is facing almost identical problems. The region’s GDP is estimated at $500 billion and these nations are facing a growing youth unemployment rate reaching 40% of the educated class. This modest economic growth does not open a sufficient number of jobs, which are estimated to total half a million opportunities per year. This prevents these states’ economies from reaping the benefits of education, although 7-10% of the GDP is spent on secondary schools.

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Experts believe that unemployment is a factor contributing to permanent instability in the region and feel that it was a main reason for the revolution in Tunisia. While the official unemployment rate ranges between 9% and 15%, the rate in reality is much higher, as the number of unemployed in North Africa is estimated at around 10 million people.

The main challenges

In its weekly report detailing the prospects of growth in the Middle East and North Africa regions, the IMF pointed out that “the main challenge faced by the new governments in the region is finding ways by which they can fulfill the aspirations of their peoples, especially the youth, who want to see their desire for growth and employment quickly attained. This comes at a time when these governments are facing budgetary difficulties, and their margin to maneuver is hampered by international and regional factors.”

Analysts confirm that the level of growth achieved during the pre-Arab Spring period did not encompass all of the estimated 90-million-strong population, nor did it prevent the spread of poverty to 20% of the people. It also did not limit the increase of social inequalities, the emergence of slums around cities and the contraction of the middle classes as a result of weak governance and rampant financial and administrative corruption. Additionally, it failed to prevent environmental degradation. The same period saw an increased dependence on outside sources to provide basic goods and services, which added fiscal burdens, siphoned off financial returns, limited the job prospects of the young generation and exacerbated dependence on foreign food stuffs, as was the case in Algeria and Libya.

Throughout an entire decade, growth remained above 5% in the region, double its level in countries of the European Union before the crisis. Yet, it failed to curb unemployment and poverty as a result of local factors, such as the absence of coordination between the five component nations, due to the presence of ideological differences between the liberal and socialist states.

Potential in doubt

Some scholars and members of the middle class cast doubt upon the ability of the post-Arab Spring governments to rectify social problems such as unemployment, despite their announced desire to do so. Moroccan parliamentary sources confirmed to Al-Hayat that the methods used to address these problems were misguided because they relied on tax increases to reduce the fiscal deficit and attempted to diminish poverty through impoverishing the middle classes at a time when growth should have been achieved by increasing exports, attracting investments and providing an atmosphere conducive to project creation and initiative. The Moroccan government, led by the Islamist Justice and Development Party, wishes to hire around 24,000 young workers in the public sector next year, as well as encourage self-employment and reduce taxes imposed on small companies to 10% of earnings. This comes at a time when the latest surveys show that unemployment among the youth has increased by 4% to reach a level of 10%, or two million people who belong to this most active of social classes.

Liberal and leftist factions believe that the Arab Spring has failed to achieve the goals of development and prosperity for which it arose. Instead, it was forced to deal with marginal issues and conduct futile discussions as a result of the lack of experience among its new leaders, difficult international conditions and increased demands engendered by the new atmosphere of freedom.

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Found in: unemployment, north africa, economic, arab
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