Articles / Rubric: Global

An Economic Dimension to the Arab Spring
October 2013 | Global

North Africa and the Eastern Mediterranean still haven’t recovered from the effects of the Arab Spring, the “Islamic democracy project.” Neither GDP growth, nor oil production, nor income from tourism have yet returned to their pre-revolutionary figures. There’s no reason to even talk about stability. All of this raises the logical question: “Did the Arabs even really need this democracy?” Arguments from political scientists, geopoliticians, and human rights activists are a dime a dozen, but we will look at the issue from an economic angle and reason with a simple gauge of how thing used to be versus how they are now.

The Arab Spring has significantly impacted economic activity in the North African and Eastern Mediterranean countries. Tracking the economic changes in the region from the pre-revolutionary to the post-revolutionary eras is quite difficult because of an absence of most economic figures from 2012-2013. There hasn’t been any economic data from Syria, for example, since the beginning of the civil war in 2011. Average real GDP growth in the region fell from 4.2% in 2010 to 2.2% in 2011, when the revolution was in full swing. This is the lowest this indicator has been for several decades. Foreign direct investment into the region declined 24% to $50 billion and the trend continued in 2012. In addition to the need for recovery from the effects of the Spring, the region’s economic figures were seriously affected by the crisis of the Eurozone, with which it has close economic ties.

While the slowdown has affected all countries, its intensity has varied from country to country. Hardest hit were those at the center of the Arab Spring: Libya, Tunisia, Egypt, Syria, and Yemen. Only Morocco, in 2011, saw positive growth. In 2012 the region gradually began to recover from the effects of the revolution, with a slight increase in average regional GDP growth to 2.4%. This year, only two countries – Libya and Morocco – have demonstrated higher GDP growth than the average growth during the decade before the revolution. According to analysts’ forecasts, economic growth in North Africa and the Eastern Mediterranean overall in 2013 should reach 3.5%, which is still lower than pre-revolution figures. But given the second round of revolutions in Egypt and the war in Syria, even this forecast hardly seems justifiable.

The decline in tourism was an immediate consequence of the unrest in the region. The number of tourists in the five main tourist destinations in the region (Egypt, Tunisia, Morocco, Jordan, and Lebanon) fell by a fourth, from 20 million in the first half of 2013 to 15 million in the first half of 2011. The biggest loss occurred in Egypt and Tunisia – nearly 40%. Overall, tourism growth in the region fell by 9% in 2011 according to the UNWTO World Tourism Barometer. In 2012, tourism in the region was recovering, but remains well below pre-revolution levels. Given that revenues from tourism account for more than 20% of Lebanon’s GDP, 12% of Jordan’s, and 5-8% of Morocco’s, Tunisia’s, and Egypt’s GDP, the decline in tourism has had a significant impact on economic growth.

Among oil-importing countries, the decline in tourist revenues and increased import costs, caused by high global prices for oil and food, led to sharp increases in the current accounts deficit. From 2010-2012, the deficit nearly doubled in Egypt, Morocco, Lebanon, and Jordan, while oil-exporting countries Libya and Algeria have not experienced such problems.

The Arab Spring has failed miserably in Egypt. In place of Hosni Mubarak, who was overthrown in 2011, came the democratically elected Mohamed Morsi. But lacking proper political competence, he managed to deepen the economic crisis his country faced within just one year, and on July 3, 2013, after another wave of protests, Defense Minister Abdel Fattah el-Sisi announced the removal of Morsi from his position and the suspension of the constitution throughout the country. By that time, Egypt’s currency reserves, which in January 2011 totaled some $36 billion, had fallen to $13 billion. The number of Egyptians living in poverty had increased from 21% to 25%. GDP growth, according to data from the World Bank, shrank from 5.5% in 2012 to 2.2% in 2013. Not surprisingly, amid all of these problems, Egyptians began to feel nostalgia for Mubarak, when political stability had been accompanied by economic stability as well. According to a Pew Research Center survey, 49% of Egyptians believe that economic problems are more important than establishing democracy. The Arab Spring has clearly failed to deal with this objective.

After the fall of the Gaddafi regime, Libya was on the brink of collapse. The central government wasn’t able to control some regions, thereby decreasing security and negatively affecting investment attractiveness. During the main part of the conflict in 2011, economic activity in the country virtually text-align: justify;came to a standstill, accompanied by a decline in real GDP by 62.1% and a 15.9% increase in consumer prices (IMF data). Export capacity in the hydrocarbons sector, which accounted for four-fifths of the GDP pre-revolution, was almost completely paralyzed by UN sanctions that were cancelled only in early 2012. During this time, the fall in hydrocarbon exports led to a budget deficit of 15.4% of GDP and sharply cut the current account surplus. This year, oil production has managed to come back up to near-2010 levels, which reduced inflation by 6.1% and increased the current account surplus to 35.9% of GDP.

But a full economic recovery in Libya has yet to happen. Mahmoud Jibril, the well-known Libyan politician and former Gaddafi-era Economic Minister, says: “First of all, Libya did not pick up its economy. Its economy wasn’t picked up. Only oil production was resumed. It’s a pity, because foreign countries rushed into Libya immediately to start pumping oil again, because it’s connected to their way of life, to their economies. While the rest of the projects all over the country are still intact, are still as they were left on the 17th of February. So, if it was not for this drop of oil, Libya would be in the same situation as Egypt and Tunisia today. So, it’s oil. Not the Libyan economy in general.”

As for the Cradle of the Arab Spring, Tunisia, according to Western experts, its economy will be able to achieve 2010 figures no earlier than 2018. But all forecasts are very conditional, because of the uncertain situation in Syria, the further instability of which and a possible military operation there would significantly impact the region.

Jeremy Shapiro, a visiting fellow in the Foreign Policy Program at the Brookings Institution, shared his forecast with WEJ: “Indeed, the past two years have been very difficult for the economies of Egypt, Libya, and Tunisia. So far Tunisia has demonstrated the best recovery figures, but I am convinced that in the future, all of the countries will benefit from the revolutions. The opportunities they have gained with the Arab Spring, they would have never gotten under the former kleptocratic regimes.”

Text: Olga Irisova

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