The impact of the financial and economic crisis on Arab States: considerations on employment and social protection policy responses

Publisher: International Labour Organization (ILO)
Author: Christina Behrendt; Tariq Haq and Noura Kamel
Type: Report
Date: April 2009
Keywords: Regional impact; National responses; Policy recommendations;
Location in CRTDA: The Machreq/Maghreb Gender Linking and Information Project (MACMAG GLIP) Library

The paper reviews the impact of the global financial and economic crisis on Arab states until early 2009 and offers a number of policy considerations on employment and social protection policies. Whilst most of the region's financial markets have significantly declined as a result of the global financial crisis, so far the impact on the real economy has been relatively limited. This is due in large part to mass surplus liquidity (GCC countries) from the oil boom witnessed in recent years, relative insulation (e.g. Syria and Yemen) and low market capitalization (e.g. Jordan and Lebanon). However, indicators of GDP growth and unemployment expected for 2009 suggest that the crisis is going to hit the region more forcefully in the near future. Real GDP growth is projected to shrink to 4 percent in 2009 (as compared to 6 percent in 2007). Unemployment rates are expected to remain largely unchanged from their 2007 levels in the best case scenario, or to climb from a regional aggregate of 9.4 to 10.8 percent in the worst case scenario. Threats from high inflation, prolonged market volatility and soaring national debt may yet take their toll in some quarters, leaving countries more vulnerable to an economic slowdown. In broader terms, regional economic growth has been spurred by oil revenue, real estate investment, housing, tourism and foreign assistance, rather than by productive activity. These wealth surpluses have not been channelled into building up strong industrial, infrastructural and human skills bases. Because of the region's relative incapacity to absorb income and investment on a diversified basis, economic instability may result if the global economic downturn deepens.

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