Economic growth doesn’t translate as citizen growth. #GDP #Wellbeing

The World Bank’s Middle East & North Africa division released a report “Inequality, Uprisings, and Conflict in the Arab World” (included below along with the report link) that confirmed what many non-economists living in Tunisia, Syria, Yemen and Egypt suspected or could attest to personally.  Some Gallup polls related citizen’s dissatisfaction in many of these countries as well.  Despite consistently high growth rates in the Middle East & North Africa (pita-consuming) region, polling of populations “showed a precipitous decline in life satisfaction scores, especially for the middle class”.  In a nutshell, citizens living in Arab transition countries said “Enough/Bes” to the current social contract and the restrictions because they felt that — economy growth aside — THEY were not growing with the state.  Point taken as Qayyum @PITAPOLICY noted here on the World Bank’s Voices & Views site.

Key observations made in the report that SCREAMED at PITAPOLICY’s interest are the following:

1. Economic inequality in Arab countries is relatively high — in particular in Egypt, where this contributed to the 2011 revolution.  [Note, economic inequality is pretty high in the United States too.]
2. Poverty headcount is higher in the Arabworld than the overall MENA region. [Note that Yemen is the poorest country in the MENA region where 80 percent of Yemenis face a humanitarian and food crisis.]
3.  The 20 or so largest companies in most Gulf States, Egypt, Lebanon, and Morocco are not listed on national or world stock exchanges. Instead, they are either firms privately owned by prominent families or state – owned firms. [See p. 29 of report.]
4. The Iran nuclear deal raised its profile in its economic evaluation.  The final adoption and implementation of the JCPOA could lead to the lifting of sanctions on Iran by
   the first quarter of 2016 thereby improving Iran’s access to trade, technology and finance.

WASHINGTON, October 21, 2015 – A longtime reliance on economic indicators as a barometer of progress in Middle Eastern and North African countries masked the level of frustration and dissatisfaction in the region ahead of the ‘Arab Spring,’ according to a new World Bank report released today.

While many observers praised the region for its consistently high growth rates in the years leading to the Arab Spring, polling of populations at the same time showed a precipitous decline in life satisfaction scores, especially for the middle class, said the latest Middle East and North Africa Economic Monitor. The report attempts to resolve the apparent paradox presented by mass demonstrations in the face of improving economic conditions. In examining the causes of the Arab Spring, the report identifies sources of frustration that persist today, and run the risk of being aggravated by the current economic slowdown.

The latest MENA Economic Monitor finds that the Arab Spring revolutions were triggered by growing and broadly shared dissatisfaction with the quality of life. Ordinary people were frustrated by their deteriorating standards of living, reflected in a shortage of quality jobs in the formal sector, poor quality public services, and the lack of government accountability, the report said. The system of general subsidies could not compensate for these problems – subsidies mattered less for the wellbeing of the middle 40 percent of society than they did for the bottom 40 percent.

“On the eve of the Arab Spring, the Arab world was an unhappy place for a variety of reasons,” said Shanta Devarajan, World Bank Chief Economist of the Middle East and North Africa Region. “The old social contract of redistribution with limited voice had stopped working, especially for the middle class, prior to 2011. People wanted a say and real opportunities for economic advancement.”

According to the report, many countries in the region seemed primed to fall into disarray following the Arab Spring uprisings. Unless there are global efforts to end regional conflicts and help countries renew the social contract, a vicious circle of instability exacerbated by economic weakness could be the long term future for the MENA region.

Just a few weeks ago, the World Bank Group launched a new Middle East and North Africa strategy focused on addressing the causes of conflict to promote peace and stability. One of the primary goals of the new strategy is to rebuild the relationship between citizens and governments through improved service delivery and increased transparency and accountability.

“The situation has continued to deteriorate in the region as many of the factors that made people unhappy before the Arab Spring are still present today,” said Elena Ianchovichina, World Bank MENA Lead Economist and principal author of the report. “Though grievances alone do not lead to civil wars, grievance-motivated uprisings can grow into civil wars in societies polarized along ethnic or sectarian lines. High male youth unemployment rates and the abundance of natural resources increase the risk of conflict.”

The report also provides an economic outlook for the Middle East and North Africa, predicting that regional GDP growth will average 2.8 percent for 2015. Thanks to continued low oil prices, civil wars and conflicts, and a likely global economic slowdown, prospects for faster growth are slim.  Civil wars have severely harmed the economies of Libya, Yemen, Iraq and Syria, and have had spillover effects on the economies of Lebanon and Jordan.  MENA’s oil-importing countries have not grown rapidly in the wake of low oil prices because they have been hurt to different extents by terrorist attacks, spillovers from neighboring wars, slow growth in the Euro zone, and political uncertainty.