Arab Spring makes region $225 billion poorer

Arab Spring makes region $225 billion poorer

Arab Spring has cost the economies billions of dollars

While the importance of economic issues in the Arab Spring is disputed, financial frustrations certainly fanned discontent.

January 15, 2013 2:52 by Reuters

By Una Galani

Ousting dictators doesn’t come cheap. Between 2011 and 2015 the total lost economic output in Egypt, Libya and Tunisia is expected to amount to $225 billion. That is at least 10 percent of the cumulative GDP estimated by the International Monetary Fund in 2010 for those five years. The Reuters Breakingviews calculation of the loss for those countries is based on 2012 forecasts.

The estimates, both old and new, are imperfect. It’s also tricky to isolate the impact of the Arab uprisings from the effects of rising commodity prices and a slow global economy. Still, the numbers are plausible. In relatively stable oil importer Morocco, where the Arab Spring has prompted tentative reforms, the cumulative GDP cut is a minimal 1 percent. For Jordan, where the regime is widely identified by analysts as the next most likely in the region to topple, the gap in cumulative expected GDP is 8 percent.

While the importance of economic issues in the Arab Spring is disputed, financial frustrations certainly fanned discontent. From that perspective, the revolutions still have years, or perhaps decades, to go before they improve absolute living standards as political instability has reduced medium-term growth prospects.

One hope is that the growth setbacks will be mitigated by a more even distribution of the wealth that is created. Egypt, Libya and Tunisia each previously enjoyed relatively high GDP growth but a disproportionate share of the riches were captured by too few. Another, greater hope is that better governance will eventually make the Arab Spring nations more productive and deliver a “democratic-dividend”.

The worry is that untested governments will struggle to find their way. In Libya, powerful militia groups need to be reined in. Tunisia’s Islamist government must find a consensus between conservatives and liberals. And Egypt’s Muslim Brotherhood, currently facing a currency crisis, will struggle to recover without implementing initially unpopular economic reforms. In the meantime, the high economic expectations of the Arab uprisings will not be met.