MENA region strives to reinvigorate growth and strengthen links to the global economy
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The Middle East and North Africa (MENA) is an economically diverse region that shares a common cultural and institutional heritage as well (see box, page 4).
The region benefited immensely from the sharp increase in oil prices in the 1970s. The resulting wealth financed an explosion of investment and growth in the oil-exporting countries. This investment, in turn, helped boost worker remittances, trade, and capital flows in other countries in the region. But as oil prices and production softened, the boom faded, prompting a slowdown and, in many cases, a decline in growth rates in the 1980s.
Deteriorating economic conditions brought about pressures for reform. In the mid-to-late 1980s and early 1990s, a number of countries introduced fiscal reforms, strengthened monetaryPage 4 policy frameworks, liberalized trade regimes, encouraged foreign direct investment, and pursued more flexible exchange rates. As a result, fiscal deficits have narrowed since the mid-1980s to levels that are well below those of other developing countries; the size of the government has declined considerably; inflation has been low and was on the decline for most of the 1990s; and the region has weathered the financial crises that plagued other regions during the past two decades.
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Growth resumed in the 1990s, with faster growth rates in reforming countries such as Egypt and Tunisia. But the region as a whole did not grow as quickly as expected, and, more important, it lagged other developing countries throughout the decade (see chart, this page).
Thus, while the region has maintained macroeconomic stability, it has failed to generate the high and sustained growth rates needed to create jobs for its young and growing population. It has also been unable to reap the benefits of globalization that other developing countries have enjoyed.
To address these challenges, the region must take urgent steps to reinvigorate growth, reignite the reform process, and strengthen its links to the global community.
Although there are significant differences among the region's 24 economies-notably between oil producers and non-oil producers and between early reformers and late reformers-all countries face, to varying degrees, several key challenges.
Increase productivity growth. The region's population is one of the fastest growing in the world. It has nearly quadrupled since 1950 and is expected to double over the next 50 years. But jobs have not...
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