Arab countries need to do more to create jobs, empower small and medium sized enterprises (SMEs) and bolster inclusive growth as the region grapples with the highest youth unemployment rate in the world, the IMF managing director said on Tuesday.
Although Arab states are progressing with reforms, they need to curtail the role of being state employer and focus on improving social safety nets, Christine Lagarde said at a conference in Marrakesh.
“Several [countries in the region] are taking steps to improve economic and financial access for youth and women, or promoting private sector development,” said Ms Lagarde. “Still, small and medium enterprises in the region face considerable challenges in scaling up, in part due to limited access to finance and weak legal frameworks. Overall, while there is encouraging progress, implementation needs to be accelerated, broadened, and scaled-up across the whole region.”
The economies of the Arab world are struggling to return to pre-financial crisis growth levels due to a host of factors. Oil importing countries like Egypt, Tunisia and Lebanon are trying to recover from the repercussions of regional conflicts, while oil-exporting states, particularly those in the Arabian Gulf, remain dependent on dwindling hydrocarbon income on the back of low oil prices.
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Economic growth in the region is forecast to reach 3.5 per cent in 2018 and 2019 as the global economy continues to expand. But it is still a far cry from the 5.6 per cent achieved between 2000 to 2008, Ms Lagarde said.
The IMF has upgraded its global growth forecast for 2018 and 2019 to 3.9 per cent, up 0.2 percentage points from its October projections.
Overall, the region suffers from the highest youth unemployment rate in the world, averaging 25 per cent, she said. More than 27 million youth will join the workforce over the next five years, which necessitates job creation policies and the governments need to dedicate resources to improve spending on social services as the region lags emerging Europe on that front.
“Fiscal policy can and must be redesigned to support inclusive growth in the region. Today, social spending – on social safety nets, health and education services – is less than 11 per cent of GDP,” Ms Lagarde said. "This compares to 19 per cent in emerging Europe. Infrastructure needs are also large in many countries.”