Caroline Freund's blog

       

Twice a year, we put together an economic outlook for Middle East and North Africa as part of the economic analysis we do at the World Bank. Over the last two years, a series of political and financial shocks have made the regional economic trends and turning points that we are looking for in these reports difficult to identify.

       

Recently I attended a health strategy meeting, where indicators of health risks showed depression to be the top disease affecting women in the Middle East and North Africa but not men (where it was on average 7^th place). In one sense, this is not too surprising because depression affects women more than men everywhere. On average, globally, depression ranks 6th for women and 16th for men. Still, MENA is unique.

       

The top blog in 2012 was by far the one calling on people to “Join Our Team”. In a region where youth employment is scarce, this call for applications to a new youth program for Arabic speakers at the World Bank received over 3000 views in Arabic and more than twice as many in English.

       

As Arab countries mark the two-year anniversaries of their revolutions, economic challenges remain sharp, and the current political and policy uncertainty make it difficult to forecast how growth will evolve over the longer run. One way to reduce some of the guesswork is to look at what has typically happened in other transitions. In a recent paper, we identified and examined 90 attempts at transition from autocracy to democracy that took place over the last half century.

       

High unemployment in the Middle East and North Africa (MENA) largely reflects the growth deficit.  While China has been growing at 10 percent for a decade and has unemployment below 5 percent. MENA is the mirror image, growing at 5 percent and suffering unemployment above 10 percent. The absence of strong growth in MENA has been a serious constraint to employment. It's worth noting though that MENA’s employment situation is not accurately described by the jobless growth that has plagued much of the industrial world in recent years.

On a recent layover in Frankfurt airport, the Harvard Business Review (HBR) magazine caught my eye.  On the cover is a ball of tangled wires in red, yellow, green and purple under the words “Managing Uncertainty” in large bold print.  The magazine was positioned strategically behind a counter of recent nonfiction, prominently displaying the book:  Europa Braucht den Euro Nicht (Europe doesn’t need the Euro). My trip was during the week when results from Egypt’s Presidential election were hanging in the balance. 

How can policymakers engineer enduring reductions in unemployment? Middle East and North Africa’s (MENA) Regional Economic Update confronts this question head on. It looks back historically to examine how countries have generated episodes of swift, significant, and sustained unemployment reductions. These we call employment miracles. And to make miracles happen the analysis unambiguously points towards prudent macroeconomic management, sound regulation and good governance as critical enablers of job creation.

Reducing corruption requires integrity and economic growth. This was the main message I took from the Economic Research Forum's (ERF) annual conference in Cairo this week focused on eradicating corruption.   More traditional calls for transparency and accountability, while still critical, were overshadowed by the recognition that incentives for corruption will persist unless people have a moral aversion to it and evidence that the only foolproof correlation with low corruption is high per capita income.

We’ve just hosted the Middle East and North Africa Forum bringing together international and regional experts to focus on the important topics of governance, employment and inclusive growth in this open moment for region. Fear and hope were the dominant emotions in this turbulent period.  Fear of the unknown, fear of repeating the mistakes of failed transitions, fear of continued unrest in some parts of the region. And, hope for a better future, a future built on dignity and inclusion, hope for peace and prosperity in the region. Few talked of a return to the compromises of the past.

The year 2011 will be remembered as the year of the Arab Spring. Revolutions brought new governments to Tunisia, Egypt, Libya and Yemen, while a number of other governments in the region introduced important reforms.  The peoples’ demands are clear: democracy, dignity, better governance, and a more inclusive growth model.  Now is the time to deliver. Yet, the political, economic and social developments are shifting and it is not clear how the population’s heightened expectations can be met.