Arab Protests Resulting in Economic Difficulties
The anti-government protests erupting in the Arab countries early this year have brought to the Middle East and North Africa a political change, in which the veteran rulers in Tunisia, Egypt and Libya have been toppled, the Yemeni president was forced to sign away his power, and Syria is still grappling with the nearly nine months of unrest.
The protests' impacts are barely limited to the political change, just as Managing Director of the International Monetary Fund (IMF) Christine Lagarde said, the political change across the Middle East and North Africa has faced headwinds from an economic slowdown across the oil-importing countries, which is pushing up already-high unemployment and increasing social tensions.
Nearly all the Arab countries hit by the protests have seen an economic slowdown this year and are expected to face difficulties in economic recovery in the coming years.
According to the latest World Economic Outlook issued by IMF in late September, the economic growth rate of Egypt will plunged to 1.2 percent this year from a strong 5.1-percent increase in 2010. It will be much lower than the growth of over 3 percent predicted by the Egyptian government.
The IMF forecasted that the economy in Tunisia will come to a stop this year, compared with the 3.1-percent increase in last year; Syria's economy, which grew by 3.2 percent in 2010, will drop by 2 percent this year; and the economy of Yemen will also see a sharp slowdown this year from a strong growth in 2010.
As for the war-torn Libya, where the NATO's military interference helped the rebel forces bring down Muammar Gaddafi's four-decade regime, IMF said it was impossible to make a economic forecast for the country in this year and the next year.
The IMF report also predicted a bleak future for the Arab countries' economy in the coming years. It said the Egyptian economy will increase by 1.8 percent in 2012, and the Syrian economy may recover by 1.5 percent, a prediction even doubted by many analysts due to the current economic sanctions imposed on Syria by some Western and Arab countries.
The economic difficulties emerged as protests and ensuing clashes dealt a blow to the pillar industries in the area. In Egypt, where tourism is one of the biggest money earners, the hotel occupancy rate at the Red Sea resorts dropped to 57 percent in early October from 76 percent in the same period last year, due to the bloody clashes between the army and Coptic protesters, according to data released by the ministry of tourism.
In Egypt's capital Cairo, hotels were also among the biggest losers when bloody clashes occurred in the Tahrir Square. The occupancy rates in Cairo's major hotels used to be nearly 100 percent during the peak season in the previous years, but this year they failed to exceed 15 percent.
The peak season for Egypt's tourism industry, which starts from September or October and lasts into the winter, is considered a foreign-currency-earning period. The industry garnered 12.5 billion U.S. dollars during the period in 2010.
However, officials in the ministry of tourism have forecasted that the tourism revenues this year would fall by more than 3.5 billion dollars, or over 25 percent, compared with the 2010 figures.
The total cost of the unrest in the region this year is approaching 56 billion dollars, according to a report issued in October by British political risk consultancy Geopolicity, which is measuring the fiscal impacts of the unrest on Libya, Egypt, Tunisia, Syria, Yemen and Bahrain.
The unrest "has so far cost the worst-hit countries some 55.84 billion dollars in 2011 alone, excluding the losses of human life, infrastructure, business and direct foreign investment," the report said.
It said the unrest, which began at the start of 2011 in Tunisia, saw the North African country lose 2.5 billion dollars. Following this, the Egyptian protests led to a loss of 9.8 billion dollars, while Libya's loss has amounted to 14.2 billion dollars and Syria incurred the worst loss of 27.3 billion dollars.
Meanwhile, the unrest has resulted in higher unemployment rates and higher consumer prices in these countries.
The war in Libya also aroused worries in the global oil market and thus pushed the oil prices higher this year. Libya used to supply about 1.6 million barrels of crude oil a day, but its production declined after the eruption of the war and almost stopped in the third quarter of this year. As a result, the world oil prices hit a two-year high in April soon after the war broke out and the Brent Crude Oil Future prices have been hovering above 100 dollars a barrel since February.
Fears over the unrest in the Middle East and North Africa may also stall the foreign investment in the region's energy sector. According to Fatih Birol, chief economist of the International Energy Agency, from now until 2035, the energy sector in the region will need an annual foreign investment of 1.5 trillion dollars to help it meet the world's energy demands. However, there may be a particular shortfall of foreign investment after the protests, and the reluctance to invest could further drive up the oil prices.
"If we don't find that money, then the production won't grow as much as it needs to grow, and as a result of that, one can see much higher prices than we have now today," he said.
Although many analysts are optimistic about the economic future of the protests-hit Arab countries, the transition period, which may last for years, is sure to be difficult and full of uncertainty.
The aftermath of anti-government protests in the Arab countries is at a critical juncture and needs to be managed in an orderly way so change benefits everyone, IMF Managing Director Lagarde said early this month at the Woodrow Wilson Center think tank in Washington.
"This is naturally a risky and uncertain period," Lagarde said, "It is a period when hard choices must be made, when post- revolutionary euphoria must give some way to practical concerns. It also doesn't help that this is happening at a time of great turmoil in the global economy."