The Impact of the Financial and Economic Crisis on Arab States: Considerations on Employment and Social Protection Policy Responses

Posted: 25 Sep 2009

See all articles by Christina Behrendt

Christina Behrendt

International Labour Office; International Labour Organization

Tariq Haq

International Labour Organization (ILO) - Regional Office for the Arab States

Noura Kamel

International Labour Organization (ILO) - Regional Office for the Arab States

Date Written: April 1, 2009

Abstract

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.

Declining living standards and increasing inequality have been of concern for some time. In the absence of well-developed social security policies, the livelihoods of growing numbers of vulnerable workers may come under further threat. Vulnerable workers also include the region’s large cohorts of migrant workers, who account for more than 60 per cent of the national labour force in most of the GCC countries. A prolonged slowdown in the international economy is likely to cause remittances, job creation, tourism and ODA to decline and unemployment to increase, particularly among the youth.

There is now an opportunity for regional investment and socioeconomic reform, which countries in the region should use to establish mechanisms to promote employment, encourage pro-poor growth, strengthen social protection mechanisms, promote gender equality and non-discrimination, and focus on human development and decent work.

Keywords: Financial and economic crisis, Arab region, Middle East, Employment policies, social protection, social policies

JEL Classification: J60, H55, H50, O00, J4

Suggested Citation

Behrendt, Christina and Behrendt, Christina and Haq, Tariq and Kamel, Noura, The Impact of the Financial and Economic Crisis on Arab States: Considerations on Employment and Social Protection Policy Responses (April 1, 2009). Available at SSRN: https://ssrn.com/abstract=1478323

Christina Behrendt (Contact Author)

International Labour Office ( email )

Route des Morillons 4
Geneva, 1211
Switzerland

HOME PAGE: http://www.ilo.org

International Labour Organization ( email )

Route des Morillons 4
Geneva, 1211
Switzerland

HOME PAGE: http://www.ilo.org

Tariq Haq

International Labour Organization (ILO) - Regional Office for the Arab States ( email )

Riad Solh - Beirut, 11072150
Lebanon

Noura Kamel

International Labour Organization (ILO) - Regional Office for the Arab States ( email )

Riad Solh - Beirut, 11072150
Lebanon

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