Economics of the Middle East

1
Economics of the Middle East
2
Data on the growth in Middle East

• Statistic results support that there is steady
  economic growth in the Middle East for the last
  50 years.
• Growth despite numerous conflicts and domestic
  civil unrest.
• Countries experienced volatile growth in the
  short run.

3
Stability not a prerequisite for economic growth

• Internal instability in the countries result from
  economic recessions.
• Economic stability prerequisite for political
  stability, not the other way round.gt Utilitarian
  control of society
• Improvements in the factors for economic
  development have negative effect in the short
  run.
• State conflicts increase the fiscal policy of the
  countries gt higher output

4
Reasons for slow economic development

• Bad political decisions in the past
• Egypt of Nasser
• Iran of Ahmadinejad
• Iraq of Saddam Hussein
• Geographical agricultural productive
  constraints
• - Resource imbalances petroleum rich Gulf
  States vs population rich Arab states
• Oil price volatile
• High population growth
• Production labor intensed, not capital intensed
• Women not part of the labor force
• Industry not diversified

5
Political Conflict

• Not bad for economic activity
• Increase in government spending on military
  ensure higher output
• YCIGXN gt high G high Y
• Fiscal policy increase economic activity similar
  to a tax cut
• Reduce unemployment military service
• Example US economy achieved significant economic
  growth during the World Wars, Korean War, Vietnam
  War
• Loss of population more capital per worker,
  consequently more consumption per worker

6
Iraq War economic development

• Influx of foreign aid
• Research and development of the oil industry of
  Iraq
• Labor training
• Better functioning political institutions for
  private entrepreneurship
• No economic sanctions trade opportunities
• Coalition presence good long term implications
  for the economy
• Increase productivity of the labor force
• 6.6 economic growth for 2008
• Decrease in unemployment from the high levels in
  2003