Political Uncertainty Across the MENA Region
Overall, the economic and political outlook has become more clouded for the MENA region, even for the oil exporting nations that should stand to benefit from higher fuel prices, at least until demand destruction kicks in. As the chart below shows, demographic traits and unemployment levels contribute to this uncertainty to different degrees, depending on the country. Across the region, governments have responded with a mixture of reinforcing food subsidies, transfers to the population and, increasingly, more extensive use of force.
Some regimes, like those of Bahrain, Libya and Algeria met rising protests with violence, responding earlier and more aggressively to protests. However, doing so threatened to add fuel to the fire. In Bahrain, for example, the government crackdown has shifted demands from reform within the system, to the overthrow of the system. In Libya, where the opposition has long been suppressed, the hardline response risks breeding extremism as the country lacks opposition institutions. Other countries, like Morocco and even Jordan, seem to have responded with a more modest security response. We continue to believe that most oil exporting regimes in the GCC will turn to concessions and government stimulus to neutralize risks, as Saudi Arabia appears to be doing in the wake of King Abdullah’s return. But, as Libya’s experience shows us, not all regimes are willing to use their war chests and oil importers in the region have very constrained fiscal balances.
Source: World Economic Forum, IMF, World Bank, national governments, United Nations Development program. Numbers in red indicate the most vulnerable states in that category.
Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE clients: “Economic Fallout From the MENA Days of Rage.”
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