MENA

By Dr. Jihad Azour

Optimism can be difficult to muster at a time of heightened uncertainty and global turmoil. The 2022 ASDA’A BCW Arab Youth Survey, conducted only a few months after Russia’s full-scale invasion of Ukraine and on the heels of the COVID-19 pandemic, reflected a darkening economic outlook. Rapidly rising commodity prices and supply-chain disruptions were fueling inflation worldwide, and higher food prices were straining low-income households and undermining food security in many parts of the Middle East and North Africa (MENA).

Not much has changed in the year since. Despite some easing since the end of 2022, price pressures remain stubbornly high; this year, inflation is expected to average around 15% in the Arab world. Many of the region’s central banks continued tightening monetary policy to prevent inflation expectations from de-anchoring. Coupled with turbulence in global financial markets and increased policy uncertainty, this could dampen economic activity for the foreseeable future.

Given this context, it is no surprise that rising living costs and unemployment were the most pressing concerns for young Arabs. The 2022 survey covered five Gulf Cooperation Council (GCC) states (Bahrain, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates), North Africa (Algeria, Egypt, Libya, Morocco, Sudan, and Tunisia), and the Levant (Jordan, Iraq, Lebanon, Palestinian Territories, Syria, and Yemen), where stark disparities in income and wealth remain.

This year, 41% of respondents reported struggling to pay their expenses in full, up from 37% in 2021. This share is much higher in the Levant, where 63% of the young people surveyed were unable to meet their basic financial obligations.

Moreover, this year’s survey highlighted how young Arabs’ concerns about education and unemployment dimmed their hopes for the future. About 83% of respondents were worried about the quality of education in their country. And, while only 15% of the youth population in GCC countries said it would be difficult to find a job, that share was 55% in North Africa and 73% in the Levant.

The most encouraging finding was growing interest in entrepreneurship. More young Arabs expressed the desire to start a business and work for themselves, while the traditional allure of government jobs appears to be waning (except, perhaps, in the GCC countries). This shift will help drive economic dynamism and boost growth, which could translate into more opportunities for future generations.

In response to these findings, policymakers should focus on addressing the cost-of-living crisis and generating more and better employment opportunities. Shielding households from rising prices will require targeted measures, such as temporary cash transfers to the most vulnerable segments of the population, though governments should resist the temptation to reintroduce or expand subsidies and trade restrictions. Meanwhile, survey responses point to a two-pronged approach to tackling the lack of jobs: fighting corruption and nepotism and improving the education system. Both require policymakers to implement long-term reforms.

While it is important to help young people gain skills that are attractive to current and future employers, governments should also provide entrepreneurial support for young Arabs hoping to start and grow their own business. Beyond offering more training, this means removing barriers to market entry, increasing transparency in the provision of public goods and services, and broadening access to credit.

The International Monetary Fund recently highlighted the importance of stepping up digitalization and investing in new technologies in the MENA region. This would help young men and women take full advantage of the new job opportunities associated with remote work, online learning, digital finance, and e-commerce. At the same time, digitalization will improve access to and delivery of social protection services.

Finally, the survey results underscore the threat posed by climate change. The Arab world relies heavily on food imports, making supplies and prices vulnerable to severe weather events in other parts of the world. Policymakers must take decisive measures to ensure food security, such as investing in climate-resilient infrastructure, using water more efficiently, and improving the management of food stocks and supply chains at the national level. Greater investment in clean-energy technologies could also deliver comparative advantages (by reducing the emissions produced by industrial exports), accelerate the diversification of the region’s economies, and create jobs.

The IMF is committed to supporting the MENA region through financing, having already allocated $53.8 billion to Arab countries since the start of the pandemic [link?], together with assistance for capacity development and policy advice. The Fund is also enhancing its lending toolkit to help countries better cope with new crises and challenges.

To help address the urgent food crisis facing its most vulnerable members, the IMF has introduced a one-year lending window, which, as of April 2023, has benefited six countries with a total of $1.9 billion. That scheme is complemented by the IMF’s new resilience and sustainability trust, which supports low-income and middle-income countries in addressing long-term challenges, including climate change and future pandemics.

While the most recent survey of young Arabs ultimately presents a positive picture, with many convinced that their best days lie ahead, it also suggest an ever-growing battle between optimism and pessimism, particularly when it comes to the economy. One hopes that with the support of international organizations like the IMF, the next survey will show a renewed sense of confidence, inspired by improved economic conditions. Hope for a better future must continue to be nurtured, even – or especially – in turbulent times.

Dr. Jihad Azour, a former Lebanese finance minister, is the Director of the International Monetary Fund’s Middle East and Central Asia Department.

Read the Project Syndicate column here