Spring Tide: Will the Arab Risings Yield Democracy, Dictatorship or Disorder?

This EIU report assesses the economic impact of the Arab Spring, with short-term forecasts for the countries in the region and a long-term forecasting model for assessing the possible growth dividend to 2050 of a transition to democracy. 

 

The region’s non-oil economies face a chilly short-term outlook, and high oil prices favour the region’s large oil producers.  MENA compares poorly with other emerging-market regions on key growth drivers, but democratisation could significantly improve the longterm growth outlook for the region, and the area’s countries could attain significant catch-up with world average incomes.

 

Key findings include:

  • In the short term, the economic consequences of the Arab Spring favour the oil-producing countries that have experienced the least instability, as events in the region have added to the risk premium in the oil price, assisting governments with fiscal expansion to help head off discontent.
  • Egypt and Tunisia require external support to shore up suddenly fragile fiscal and balance-of-payments positions.
  • However, where prolonged political upheaval is avoided, we expect a relatively swift bounceback.
  • Over the long term, the Arab Spring would only produce significant economic benefits were democracy to take root across the region.
     

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