x Abu Dhabi, UAEWednesday 24 January 2018

Economic roots of Arab Spring remain

Two years on from the start of the Arab Spring, livelihoods for many people in countries in transition are little brighter than at the start of the unrest.

Uncertainty about the outcome of the vote on a new constitution is holding back hiring in Egypt.Amr Nabil / AP Photo
Uncertainty about the outcome of the vote on a new constitution is holding back hiring in Egypt.Amr Nabil / AP Photo

Two years on from the start of the Arab Spring, livelihoods for many people in countries in transition are little brighter than at the start of the unrest.

Joblessness has risen and, for some workers, wages have fallen since the first waves of protests erupted.

Deteriorating fiscal positions in Egypt, Tunisia, Yemen and Jordan have also limited the ability of governments to meet public demand for better living standards.

In Syria, civil war has killed about 40,000 people. The conflict and sanctions against the president Bashar Al Assad have shaken the lives of millions more.

"In the short term, things may get worse for people before they get better," said Marios Maratheftis, the global head of macro research at Standard Chartered. "Many of the economic and financial problems in these countries are structural so will take time to be addressed."

It was frustration at overbearing government rules that triggered Mohamed Bouazizi, a Tunisian street vendor, to set himself on fire on December 17, 2010. His actions helped to set off a wave of unrest across the region as people took to the streets calling for greater freedom but also in protest of poor job prospects, rising living costs and government corruption.

Since then unpopular rulers in Tunisia, Egypt, Libya and Yemen have been overthrown and replaced with interim governments. Tunisia, Egypt and Libya have all taken steps to move towards democracy, a move that many people hope will improve their lives in the long-term.

In Syria, the outlook is still bleak. The economy is expected to shrink by a fifth this year, while inflation has surged to 40 per cent, the Institute for International Finance warned.Across the region, some of the root causes of the discontent remain as pressing as ever.

Joblessness has worsened.Unemployment among young people in North Africa jumped five percentage points last year to 27.9 per cent from the year earlier, a report released by the International Labour Organization (ILO) in March showed. In the Middle East, youth unemploymentrose to 26.5 per cent.

A similar trend was expected this year."We were planning an employment fair this month for companies to advertise jobs but have decided to postpone it until February as nobody is looking to hire," said Khaled Sewelam, the director of research and publications at the American Chamber of Commerce in Egypt.

"A lot of factories are closing and a lot of businesses are worried about labour strikes and the inability of police to protect them."

Since the uprisings, strikes have become a feature of life in Egypt and Tunisia as workers rally for better pay and working conditions.

Uncertainty about the outcome of the vote on Egypt's new constitution was another factor holding back hiring, said Mr Sewelam.

But the still-sickly state of the transitional economies is mainly to blame for the lack of job creation. Egypt's economy is tipped to grow 2 per cent this year, with Tunisia's GDP expansion little better at 2.7 per cent, according to the IMF. Such levels are rosier than last year's performance but still insufficient to encourage businesses to hire.

"We are still at numbers well below population growth and certainly well below what is needed to address unemployment," said Masood Ahmed, the IMF regional director for the Middle East and Central Asia.

The situation is exacerbated by the growing number of young people hitting the labour market. More than 50 million jobs are needed across the Middle East and North Africa (Mena) over the next decade to ensure social and economic stability, according to the World Bank.

Governments have so far not taken steps to direct colleges and universities towards preparing people for careers in private industry, rather than the public sector.

World Banksurveys have consistently shown that about 40 per cent of firms in the Menaregion identify an inadequately educated workforce as a major constraint, the highest rate in the world.

In another challenge to the labour market, wages in the Middle East have dropped by 1.4 per cent in the two years since the start of the Arab Spring, an ILO report released last week estimated.

The outlook for living costs remains mixed too. While global food prices have fallen from a year ago, Egypt, Tunisia and Jordan are among governments under pressure to ease subsidies on basic goods as they seek to rein in hefty budget deficits.

The need to control spending and widening deficits has emerged as an immediate priority for most governments since last year, taking their focus from broader steps to improve the lives of citizens.

In the short-term, the outlook is most pressing in Egypt. The finance minister Mumtaz Al Said last week announced a month postponement in plans to take a US$4.8 billion (Dh17.63bn) loan deal with the IMF, needed to help replenish foreign reserves and entice international investment.

"We are coming to the end of the road," said Liz Martins, senior Mena economist at HSBC. "There is $15bn in reserves left, a big fiscal deficit and a weak growth outlook."