Beirut, 17 December 2018 (Communication and Information Unit)--Fixed exchange-rate regimes, despite substantial misalignments, have a positive impact on growth in the Arab region, says the new Survey of Economic and Social Developments in the Arab Region 2017-2018 launched today by the United Nations Economic and Social Commission for Western Asia (ESCWA) at its headquarters in Beirut.
The Acting Executive Secretary of ESCWA, Mr. Mounir Tabet, the Director of the Economic Development and Integration Division (EDID), Mr. Mohamed El Moctar Mohamed El Hacene, the report co-author, Mr. Mohamed Hedi Bchir, launched the document in a press briefing moderated by the Editor-in-Chief of Arab Economic News, Ms. Violette Ghazal Balaa.
Mr. Tabet revealed that the Survey this year highlights reforms of exchange rate policies in the Arab world and that one of the most important conclusions revolves around the global gross domestic product (GDP) growth that reached 3.1 per cent in 2017 compared to 2.5 per cent in 2016. This was mainly driven by the rebound in worldwide trade dynamics, a strong investment initiative and improved labour market conditions in the world’s major economies, he added.
At the regional level, Mr. Tabet underscored that “the continuous state of uncertainty in politics and economics at the medium and long terms in the Arab region only adds to the burden of the regional economy, particularly in vulnerable economies where challenges increase as interest rates are hiking.”
According to the Survey, economic growth in the Arab region slowed to 1.5 per cent in 2017 compared to 2.8 per cent the year before. But a gradual improvement in the regional economic outlook is anticipated: growth rates of 3.3 per cent and 3.2 per cent are expected for 2018 and 2019 respectively. “This is largely due to the performance in the region’s oil exporters, revealing that Arab economies are still essentially dependent on oil,” Mr. Tabet noted.
He then stressed that Arab countries face a major challenge of devising development, fiscal, monetary and economic policies that first and foremost allow private sector to invest in industries that can create jobs, provided these jobs are sustainable and decent and such investments are eco-friendly. “To achieve all that, there is an inevitable role of technology and innovation,” he said.
In fact, the Survey showed that redoubling efforts for fiscal consolidation, elimination of energy-related subsidies and other critical reforms for pension and social security systems will pave way to boosting productivity and fostering structural transformation in the region.
Meanwhile, Mr. El Hacene presented on the different sections of the Survey and spoke about regional inflation where the consumer price inflation rate in year 2017 was estimated to be 6.7% compared to 5.3% in 2016. “But inflation pressures are expected to decrease in the coming years,” he said.
He also delved into social developments in the Arab region shown by the Survey as lagging behind the rest of the world in terms of women’s participation in the labour force in spite of remarkable progress in their education. He affirmed that there is a tangible progress towards social development and gender equality in the region, but remains gradual and different among countries.
Mr. El Hacene stressed that wide-scale displacement and migration continue due to ongoing armed conflicts in the region. According to the United Nations High Commissioner for Refugees (UNHCR), the situation in Syria, Iraq, and Yemen, worsened in 2017 and would continue to do so in 2018.
The Chief of the Modelling and Forecasting Section in ESCWA, Mr. Mohamed Hedi Bchir, who co-authored the report, spoke about the exchange regime in the region and particularly in countries with very different experiences like Egypt, Morocco and Lebanon, and stressed that what works in other countries may not work in the Arab States context.
Mr. Bchir underscored that the choice between a rigid or flexible regime is a complex decision that hinges on several country-specific characteristics, such as the degree of capital mobility, trade share with main partners, degree of flexibility and sustainability of fiscal policy and the extent to which wages are sticky. The complexity of factors influencing the choice of exchange-rate regime varies from country to country, which is why no clear consensus has emerged.
For our countries, given the uncertainty, fixed exchange regimes seem to be the second-best solution in the current circumstances, he added.
The Survey of Economic and Social Developments in the Arab Region produced by ESCWA is an annual flagship publication that looks at the region’s socioeconomic development assets, opportunities and constraints, and provides analysis on the economic outlook and forecasts for the region and individual countries.
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