The unprecedented wave of protest, demonstration and, in some cases, open revolt that has spread across the Mena region in just a matter of weeks has been a cause for celebration in most parts of the world.
International opinion agreed it was a good thing to sweep away aged, stagnant regimes that had become distant from their increasingly young populations, and which were failing to meet their aspirations.
The consensus was that only good could come from the transformations taking place in the Arab world, and that their liberated economies would fly high.
Trust the bankers to spoil that rose-tinted view of the past couple of months. In a new assessment of the economic effects of the "Arab spring", HSBC, the international banking giant with a strong presence in the region, injects a sober sense of economic realism into the picture. There will be a price to pay for the euphoria of recent weeks.
It's a wonder that anybody ever thought otherwise, really. Revolution and social upheaval have never been the natural companions of economic prosperity, at least in the short term.
The Mena region will be challenged, HSBC argues. "We expect every country to be hit by a downturn in confidence, and anticipate that all will find foreign capital more difficult and costly to attract," says the report, produced by the bank's economics team in Dubai. "As a consequence, we have cut our forecasts for 2011 non-oil GDP growth in almost every Mena state, and cut our projections for the countries that have been most affected by as much as 6 percentage points."
That is a big generalisation, and HSBC is quick to point to exceptions to its general pessimism: increased public spending will stimulate demand in many countries; the oil-exporting countries, especially of the Gulf region, will have the compensation of increasing energy revenue; some countries, such as the UAE and Qatar, could avoid the downturn altogether as they become increasingly viewed as islands of stability.
In Saudi Arabia, the biggest economy in the region, growth estimates have actually been revised upwards on huge increases of public spending, amounting to US$10,000 (Dh36,730) per adult head of population, or 30 per cent of GDP.
But overall, and in the short term (most of HSBC's forecasts are until the end of next year), the turmoil will be negative for the region's economies. Furthermore, the bank argues, the greater the extent of socio-political change and the degree of social disruption brought about by the turmoil, the more negative the effect will be.
The big losers, says HSBC, are likely to be Egypt and Bahrain. In the former, "the disruption caused by political unrest, ongoing industrial action, reduced exports of goods and services and a marked fall in investment could lead to the economy contracting over the first half of 2011, and weak activity in the second half". After a heady 5 per cent growth last year, the bank forecasts near-zero growth in GDP for the current year.
The financial position will also weaken as trade and tourism slow and capital flows out. The central bank of Egypt will have to draw heavily on its reserves and may be called in to support increased state spending.
Bahrain faces similar problems, although on a smaller scale, according to HSBC. "Tensions are likely to remain elevated," the bank says. "At best this is likely to weigh on confidence, at worst it carries with it the threat of fresh unrest." The kingdom is likely to have suffered lost production in recent weeks, from which it could bounce back quickly on a combination of higher public spending (subsidised by the GCC pledge of $10 billion) and high energy prices.
But higher public spending in Bahrain will probably only partly offset an anticipated fall in private-sector investment as local and international companies revise their plans. "Efforts to rekindle Bahrain's role as a financial centre are likely to have been dealt a particularly heavy blow," says HSBC.
GDP growth will be near zero this year, rising to just 2.5 per cent next year, it forecasts.
There are some big variables that fall outside the scope of HSBC's work. Libya and Syria, for example, were never open to foreign institutional investment, so are not included. But the potential for events in those two countries to affect the wider region should not be underestimated.
