Middle East and Central Asia Department
© 2014 International Monetary Fund
Joint Bank-Fund Library
Toward new horizons: Arab economic transformation amid political transitions / prepared by a staff team led by Harald Finger and Daniela Gressani comprising Khaled Abdelkader [and eleven others]. – Washington, D.C.: International Monetary Fund, c2014.
“Middle East and Central Asia Department.”
Includes bibliographical references.
1. Economic development—Arab countries. 2. Arab countries—Economic policy. 3. Fiscal policy—Arab countries. 4. Monetary policy—Arab countries. 5. Foreign exchange rates—Arab countries. I. Finger, Harald. II. Gressani, Daniela, 1956– III. Abdelkader, Khaled. IV. International Monetary Fund. V. International Monetary Fund. Middle East and Central Asia Department.
Disclaimer: The views expressed herein are those of the authors and should not be reported as or attributed to the International Monetary Fund, its Executive Board, or the governments of any of its member countries.
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The paper is the outcome of an interdepartmental project of the IMF’s Middle East and Central Asia Department with the Communications, Fiscal Affairs, Monetary and Capital Markets, Research, and Strategy, Policy, and Review Departments.
The authors would like to thank Masood Ahmed, Director of the Middle East and Central Asia Department, for his guidance and comments. They are also thankful for advice and support in coordination from Prakash Loungani, David Marston, Marco Pinon, Christoph Rosenberg, and Abdel Senhadji; and for guidance on political economy issues from Raj Desai.
Thanks are also due to Yasser Abdih, Abdul Malik Al-Jaber, Nabil Ben Ltaifa, Ralph Chami, Jean-François Dauphin, Shantayanan Devarajan, Ishac Diwan, Gilda Fernandez, Edward Gemayel, Christopher Jarvis, Juha Kähkönen, Alfred Kammer, Kristina Kostial, Inutu Lukonga, Amine Mati, Tokhir Mirzoev, Eric Mottu, Gaelle Pierre, Bjoern Rother, Randa Sab, Nasser Saidi, Hossein Samiei, Carlo Sdralevich, Gazi Shbaikat, Natalia Tamirisa, Shahid Yusuf, and Younes Zouhar for providing comments at various stages of drafting the paper.
Special thanks are due to Gohar Abajyan and Jaime Espinosa-Bowen for their research assistance, Kia Penso for her editorial contributions, Cecilia Prado de Guzman for assistance with formatting and document preparation, and Joanne Johnson and Katy Whipple for editorial guidance and production support.
The transformations in the Arab world that began three years ago had their roots not only in demands for more voice and participation but also in a growing frustration with the economic environment where job opportunities were few and connections seemed to be more important than merit in accessing the gains from economic growth. Since then, governments in these countries have been pursuing country-specific agendas of political and constitutional reform, but they have also had to grapple with heightened macroeconomic vulnerabilities, the effect, in part, of a worsening international, regional, and domestic environment on private sector confidence and growth. The near-term economic outlook continues to be challenging and subject to downside risk, and so the focus on maintaining macroeconomic stability will remain a key priority for the coming year.
However, it is also important for these governments to embark on the bold reform agendas that will make for more dynamic and inclusive economies, generate more jobs, and provide equal access to economic opportunity for all segments of society. Unless strong economic and financial reforms are implemented, a gradual economic recovery will not be enough to bring a meaningful reduction in the region’s high rates of unemployment in coming years, particularly among women and youth.
Realizing the economic potential of the Arab Countries in Transition lies first and foremost in the hands of countries’ governments. But the international community, including the IMF, can help. With the benefit of hindsight, it has become clear that in past years we paid insufficient attention to growing socioeconomic imbalances and unequal access to economic opportunity. The Arab transitions have thus prompted us to step back and rethink our approach to economic policy recommendations for the countries undergoing transition. While we have been actively engaged in all transitioning countries, with a focus on macroeconomic stabilization and policies in support of economic development, we have to date not laid out our comprehensive view on the macroeconomic and structural policies that we see as essential for safeguarding macroeconomic stability and putting in place the right conditions for high, sustainable, and inclusive growth. This publication attempts to fill that gap and to provide our intellectual contribution to the ongoing discussion on setting the right policies in the Arab Countries in Transition.
In this spirit, I hope that this publication will be of use for policymakers and other stakeholders in the countries undergoing transition, and for the international community that supports them, in order to enable an economic transformation that will respond to the hopes and aspirations of their young and dynamic population.
Director, Middle East and Central Asia Department
International Monetary Fund