Estimating Potential Growth in the Middle East and Central Asia

28 Pages Posted: 14 Apr 2015

See all articles by Pritha Mitra

Pritha Mitra

International Monetary Fund (IMF)

Amr Hosny

International Monetary Fund (IMF)

Gohar Abajyan

International Monetary Fund (IMF)

Mark Fischer

International Monetary Fund (IMF)

Date Written: March 2015

Abstract

The Middle East and Central Asia’s economic growth potential is slowing faster than in other emerging and developing regions, dampening hopes for reducing persistent unemployment and improving the region’s generally low living standards. Why? And is it possible to alter this course? This paper addresses these questions by estimating potential growth, examining its supply-side drivers, and assessing which of them could be most effective in raising potential growth. The analysis reveals that the region’s potential growth is expected to slow by ¾ of a percentage point more than the EMDC average over the next five years. The reasons behind this slowdown differ across the region. Lower productivity growth drives the slowdown in the Caucasus and Central Asia and is also weighing on growth across the Middle East (MENAP); while a lower labor contribution to potential growth is the main driver in MENAP. Moving forward, given some natural constraints on labor, total factor productivity growth is key to unlocking the region’s higher growth potential. For oil importers, raising physical capital accumulation through greater investment will also play an important role.

Keywords: Economic growth, Middle East and Central Asia, Economic conditions, Potential output, Total factor productivity, Regional economics, potential growth, output gap, production function, capital, labor, tfp, financial crisis, gdp, labor force

Suggested Citation

Mitra, Pritha and Hosny, Amr and Abajyan, Gohar and Fischer, Mark, Estimating Potential Growth in the Middle East and Central Asia (March 2015). IMF Working Paper No. 15/62, Available at SSRN: https://ssrn.com/abstract=2594145

Pritha Mitra (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Amr Hosny

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Gohar Abajyan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mark Fischer

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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