How the Greek tragedy came to the Middle East
Long term monetary policies put in place several years ago contributed to the European sovereign crisis that started a few years ago. Greece was the most hit country; experts raised fears that the country would not be able to finance her increasing debt. International Monetary Fund and the European Union bailed out the country twice in May 2010 and in July 2011 that concluded early 2012. However, the European debt crisis didn’t stop there; other countries were also bailed out from their debt including Ireland November 2010 and Portugal in Mid 2011.
In spite of these bailouts the Euro zone still faces economic difficulties. This crisis extended to other regions with its effects felt in every country especially due to globalization. The Middle East is among the developing economies, the crisis in Greece was much felt in the changes in prices of various commodities. The Middle East countries which include Iraq, Saudi Arabia, and Qatar being the major oil exporters had predicted economic growth rate of 5% in 2011. Oil prices had increased by 31.6% in 2011 hence the growth rate was achievable.
The Euro zone crisis however, decreased the global demand for oil this slowed economic growth in the region. The oil prices remained considerably high in 2011 due to the unrest in the MENA region which limited the oil supply. Global oil demand will continue to decrease if European debt crisis continue, oil prices will fall affecting the economic growth of the Middle East. This region will feel the Greece debt crisis through trade more than in the financial sector. The Middle East trade will significantly be affected with a fall in commodity prices, the exports market will considerably fall aswell. This will lead to a decrease in economic growth and eventually lead to unemployment and poverty in the Middle East region.
If the crisis in Greece continues it would severely affect the Middle East economies especially the oil prices as well as demand. People living in here, especially the low income household will be severely affected. The poverty levels in the region are expected to rise from the current average of 19% of those living below the two dollar score. These countries rely on oil exports heavily and the crisis effects on trade may severely affect their economies. The Middle East economies will be hit by a decrease in tourism, trade and direct investment from Greece and other Euro zone countries. It had been underestimated how fast economies can collapse, a crippling oil supplies can easily crash the Middle East economies.
The crises in Greece not only lead to a trade imbalance in Greece but also in the Middle East. The global economy is recovering as a result of a review in the fiscal policies over the past few years. Most economies are back on track registering growth experts arguing that the Euro zone crisis has been contained. This is however not the case due to reducing competitiveness and increasing costs in the developed countries. Inflation in the developing region like Middle East might spark a huge crisis very soon.
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