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Arab Spring nations hit delayed economic recovery
IMF official says a big challenge this year is managing the expectations of an increasingly impatient population.
May 26, 2013 8:54 by Reuters
Arab spring countries face rising social tensions that could thwart an early economic recovery from over two years of political turmoil that has worsened fiscal pressures and threatens macroeconomic stability, a senior IMF official said on Saturday.
Masood Ahmed, International Monetary Fund (IMF) Director for the Middle East and North Africa, said oil importers Morocco, Tunisia, Egypt and Jordan faced the double shocks of high energy and food import bills and the impact of a global economic downturn along with growing popular disaffection since the wave of Arab revolts over two years ago.
“The big challenge this year is to manage the expectation of an increasingly impatient population to undertake the measures that will stabilise the economy and would begin to lay the foundations of an economic transformation that would generate more job creating and inclusive growth,” Ahmed said.
“Those political transitions are turning to be more prolonged and in some cases more contentious and unemployment is higher and social unrest is rising,” Ahmed told Reuters in an interview on the sidelines of aWorld Economic Forum (WEF) conference on the Middle East and North Africa.
Ahmed said the plight of these countries hit by protests was worsened by extra spending on food and energy subsidies that forced governments to draw on foreign reserves and expand domestic borrowing at high interest rates that raised public debt.
Political turmoil was hurting much needed private investments in the meantime, the IMF official said.
“In a number of these countries, private confidence has not yet taken hold so the recovery such as it was in 2012 was driven by continued government spending rather than a recovery in private activity,” Ahmed added.
Two years of higher spending on wages and food and fuel subsidies will push budget deficit deficits even higher to an average eight percent in 2013. In Egypt, for example the budget deficit was expected to rise to between 10 to 12 percent of GDP this year, the IMF official said.
“The cost of that is that budget deficits have begun to rise and in some cases have risen to levels that are progressively unsustainable,” Ahmed said.
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