Uncertainty and weakened growth have hit the Middle East and North Africa region. IMF’s Regional Economic Outlook: Middle East and Central Asia Update April 2019 shows that growth in countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region has weakened due to rising conflict, corruption, slow reforms, high levels of debt and fluctuations in oil prices. The IMF further warns that elevated levels of uncertainty might increase risks for investors in the region and lead to capital outflow. Especially Iran, the second largest economy in the region after Saudi Arabia, will shrink by 6% in 2019.
The weak economic outlook is especially felt by the youth. In a region where about 45% of the population is under 25 and youth unemployment surpasses that of other parts of the world, weakened growth affects them greatly. In the 2019 Arab Youth Survey, Young Arabs name rising costs of living and unemployment as their major causes for concern. They perceive the ongoing religious conflict as a root problem. The respondents say conflicts with religious and sectarian elements, such as those in Syria and Yemen, are holding back the Arab world. It leads the youth to lose faith in the governance of their religious institutions. A steeply risen number of respondents have rated religion as “too influential” in the Middle East and almost half of them believe religion is losing influence in the region.
Growing unease with stagnating progress might lead to new unrest. Indeed, the survey concludes that the youth are calling for reform. While it shows that faith remains important to young Arabs, it also emphasizes the difficult task the youth faces of trying to reconcile the conservative religious traditions of their parents with the modern world they live in. Today’s rising Arab generations have different grounds on which to debate religion than their parents, which might widen the generational gap in society. At the same time, awareness about mental health is growing in the region, laying bare high levels of anxiety and depression among the people. Affected by strains on mental wellbeing, such as economic struggles and ongoing uncertainty and conflict, as well as becoming detached from the religious establishment, the youth might come to fuel new unrest. Similar to the 2011 uprisings, youth groups were behind the movement leading to the Arab Spring. The region is already witnessing intensified rebellion in Libya and a new wave of protests in Algeria and Sudan.
- -Stagnating progress will cost more lives. Human development will further experience setbacks in the region, as more economic insecurity will fuel upheaval. New findings from the United Nations show that the conflict in Yemen will have claimed about 102,000 lives by the end of 2019 and that more victims will die of hunger, disease and the lack of health clinics and other infrastructure than from fighting. Furthermore, the UN predicts that if the war ends in 2022, development gains will have been set back an entire generation (26 years).
- (Political and economic) reform processes will still take long to lead to progress. Favorable demographics will underpin long-term growth in the decades ahead, but productivity gains will be slow. Despite efforts to diversify their economies, many MENA countries will still rely on oil in the coming years.
RISKS MARKED ON THE RISK RADAR AS NUMBER 2: tensions throughout the Middle East, EM insolvency, large-scale migration