Economic and security conditions have deteriorated to unprecedented levels in the countries that went through the Arab Spring, due to the chaos caused by the seizure of power by fundamentalist groups such as the Muslim Brotherhood and Iraq’s Al Dawa Party.
This state of heightened troubled calls for a study to examine what and how this happened, and would go some way to lessen the shock suffered by the Arab people.
This column is not the place to assess the general repercussions from those events, but we need to discuss the terrible economic downturn the affected Arab countries have had to go through. The turn of events has had a catastrophic impact on the most productive sectors, which then set off the drop in GDP growth rates.
As if these were not enough, it led to the outflow of domestic and foreign capital and accompanied by the departure from these countries of their best and brightest. Internally, the collective impact has led to high rates of unemployment and a lower standard of living for millions of their citizens. These have fuelled a further round of bitter conflicts in the region.
This is but a brief summary of the disasters to befall the countries in their “Arab Autumn” phase. With the exception of Libya, the others are on the verge of bankruptcy due to sharp declines in currency reserves and a deterioration in the financial markets.
This has prompted citizens to seek work abroad, especially in the GCC, to meet their financial needs and as a means of escape from the inflationary spiral in their own countries. The subsequent increase in money transfers helped prevent the total collapse of the economic situation in the troubled countries.
The chain of events has caused severe damage to Arab economies, especially in regard to the tourism sector on which Egypt and Tunisia are so dependent. The sector continues to suffer despite the calmer conditions prevailing in those countries. Losses have hit astronomical levels as Egypt’s tourism sector alone saw revenues drop 35 per cent to $5.8 billion (Dh21.3 billion) in 2013, compared to $12.5 billion in 2010.
These include the nearly $1 billion losses incurred by Egypt Air alone. An estimated 50 per cent of jobs related to the tourism sector have become redundant, while salaries of the remaining were cut. The number of tourist arrivals dropped from 15 million in 2010 to 9.5 million last year. The country’s broader economic growth has dropped from 5.1 per cent in 2010 to under 2 per cent, and foreign debt has risen by 43 per cent.
In Libya, oil production will not return swiftly to the pre-crisis level, while oil output has dropped to 900,000 barrels a day compared to 2 million barrels before the events.
Yemen is on the brink of a real famine because of the interruption of economic activities, based on UN reports that show 50 per cent of the population are living in extreme poverty.
Although the spiralling unemployment numbers was one of the reasons behind the protests, more are losing jobs and joining the queues of the unemployed, thus placing more burdens on the authorities.
To alleviate the crisis, GCC countries provided more than $50 billion in aid to support the affected currencies and budgets and for the provision of food and meeting the needs of refugees. It would be possible to use a portion of these funds to implement development projects once normalcy prevails,
With the exception of the GCC, many other countries have made funding promises, particularly the US and the EU, but the bulk of these — totalling $40 billion — have not been met.
The economy will be the focus of political arguments and a real test for the authorities in the Arab Spring countries — especially since the opposition, including the Muslim Brotherhood and its allies, pursue an approach of economic sabotage. This attitude will harm the interests of all, especially the powerless silent majority.
Unfortunately, the economic consequences of sabotage will be harmful since it directly affects living conditions. This approach also undermines sensitive sectors such as tourism, transport and services, and will lead to even higher unemployment rates, given that the services and tourism sectors are labour intensive.
This means that large sections of society will continue to suffer from a deterioration in living standards. Hundreds of small and medium-sized businesses, which rely on tourism or those which rely on marketing their products and services to the domestic market, are announcing their bankruptcy. However, the overall picture seems unclear and a state of uncertainty is engulfing the economic future of these troubled countries.
There are negative indicators that can clearly be seen through the many divisions that are being created, most notably in Libya, Iraq and Syria, and which will lead to more destruction and economic deterioration.
It has become necessary to work swiftly to bring the economies back to normality. Stopping the outflow of investments and attracting new ones should top the priorities for these regimes, keeping in mind Egypt, Tunisia and Libya have feasible investment opportunities.
The success of the new approach will depend on many considerations, as there are multiple regional and global entities involved as well. These will determine the pace of future development in the region. But it has to be done with extreme caution as the situation is still unstable.
Unfortunately, economic conditions are heading towards further deterioration, in sync with a continuing decline in growth rate and employment opportunities. Losses sustained by the Arab Spring nations have already exceeded $1 trillion.