Mideast Unrest Shows Need to Consider Bigger Picture

IMF chief spotlights importance of broad access to economic opportunity

Food and fuel crisis compounds effects of Mideast unrest in some countries

Greater integration in North Africa could generate growth, employment

Speaking to Middle Eastern journalists on April 6, in advance of the IMF-World Bank Spring Meetings, Strauss-Kahn said that the usual macroeconomic indicators such as growth, inflation, fiscal deficits, and other gauges are not sufficient to assess the true health of a country’s economy.

Countries such as Egypt and Tunisia have performed relatively well on a macroeconomic level in recent years, Strauss-Kahn said. But strong overall growth masked a serious problem of inequality within those economies. Since inequality can lead to unrest—which, in turn, leads to macroeconomic problems—the IMF should have paid more attention to the distribution of income, not just aggregate results, the IMF chief said.

“We have to take into account the fact that what could be destabilizing for growth is not only the situation of the banks, inflation, the asset bubble, the fiscal deficit, the current account deficit, but also things that have to do with the distributional effect,” he said.

Strauss-Kahn said the IMF would begin incorporating more data on unemployment and inequality into its analysis by working with other institutions that specialize in these areas, such as the World Bank, the United Nations, and civil society organizations.

Food and fuel prices

Strauss-Kahn observed that there were also inequalities across countries, not just within them.

The Middle East is being hit by a food and fuel crisis just as it is grappling with the economic effects of the unrest, Strauss-Kahn said, noting that food prices are nearing 2008 levels. While the region’s oil exporters would benefit from the rising price of oil, oil importers would be hurt. In oil-importing nations, higher energy and food prices could cost governments around 3 percent of GDP.

The full economic impact of the regional unrest is as yet uncertain, he said. Strauss-Kahn cited a significant first-quarter decline in tourism—an industry on which Tunisia and Egypt rely heavily—as taking a toll. How much time it would take for the sector to...