Survey of Economic and Social Developments in the Arab Region 2012-2013

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The Survey of Economic and Social Development in the Arab Region 2012-2013 assesses the most recent economic and social developments of Arab countries, using the data that became available by the 2nd quarter of 2013. The immediate policy challenge for most of Arab countries is to create employment without relying on an expansionary fiscal and monetary policy mix. The Survey finds that several policy options are available for this policy challenge even in this highly uncertain situation surrounding the region’s socioeconomic development. In parallel to the specific policy proposals, the Survey emphasizes the importance of policy dialogue in the area of employment and more constructive regional integration framework on this subject. The revival of regional leverage along this line of reform needs be encouraged to halt the polarization by stabilizing the region’s socioeconomic development paths for all Arab countries.

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The Global Context and its Implications in the Arab Region

Throughout 2012, the world economy continued to struggle to recover from the global financial crisis of 2008-2009. Central banks in developed economies took the stance of monetary easing to its maximum. A series of monetary policy coordination efforts of that line had successfully contained the contagion of liquidity crisis. Moreover, in 2008 and 2009, a series of fiscal stimulus policies at the global level had successfully averted the risk of an implosion in global demand growth and prevented the world economy from becoming trapped in a deflationary spiral. Nevertheless, despite those short-term successes, the struggle for a stable economic recovery became more apparent in 2012 as economic policy options for many governments were further exhausted. The quickly shrinking fiscal space forced many governments to maintain a stance of fiscal austerity. Meanwhile, the speed of the balance-sheet adjustments of the financial sector varied: while a smooth adjustment has been observed in the United States, the process has been slow in the Eurozone area. The remaining uncertainty over financial risks, which still could be contagious, precluded the strong investment-led growth recovery of the world economy at this stage. The developed economies, particularly in Europe, are still prone to a double-dip recession (table 1.1).


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