World Bank: Middle East and North Africa region experiencing economic boom
The Middle East and North Africa (MENA) region is experiencing an economic boom driven largely by increasing oil revenues, but this growth remains insufficient for addressing the region's development challenge of creating jobs, according to a World Bank report released Sunday.
The first in a series of annual reports that monitor major economic developments in the region, Middle East and North Africa Economic Developments and Prospects 2005 says that close to 100 million new jobs will be needed over the next 20 years to absorb new entrants into the labor force and today's unemployed workers.
Over the last two years, economic growth averaged 5.6 percent in MENA, up from the 3.6 percent growth over the 1990s. This significant growth was steered by external factors - hike in oil prices and a subsequent rise in oil production-which significantly boosted government consumption and investment. The report points out however that in per capita terms, the growth upturn in MENA continues to lag behind most other regions of the world.
"MENA's strong growth over the last two years does not change the fundamentals for this region," says Mustapha Nabli, World Bank Chief Economist for the Middle East and North Africa. "We are still talking about a region with limited private sector activity and employment creation, limited integration into the global economy, and strong dependence on volatile oil markets. What has essentially happened over the last two years is a positive terms of trade shock."
However, the report reveals that the region has by and large not kept pace with worldwide progress in embracing structural reforms, as shown by its measurement of progress in reforms in the areas of trade, business environment and governance.
"There are tremendous demands on this region, in terms of the levels of growth and employment creation needed over the next two decades," says Jennifer Keller, the report's principal author. "So it is paramount that we understand whether MENA is implementing the economic realignments to meet these challenges."
According to the report, the region has made great strides in trade reforms. Two-thirds of MENA countries ranked above half of all countries in the world in terms of reducing tariff and dismantling non-tariff barriers to trade. Progress was particularly strong in a few countries including Egypt, Jordan, Lebanon and Saudi Arabia.
Looking forward, the report predicts that shifts in external factors will continue to shape the profile of the region's growth in the short term. Moderately easing oil prices, partially counterbalanced with European growth conditions suggest growth will continue, particularly in the labor abundant diverse economies. Overall, regional growth is expected to average 4.9 percent in 2005, moderating to 4.3 percent in 2006.