Recent popular protests in the Middle East and North Africa region, although likely to have a negative economic impact in the short run, might actually help to unleash the countries’ long-term growth potential.
By providing the impetus for reforms, these events may encourage better governance, greater transparency, and more competition—in other words, tackling many of the constraints that have held back progress in these societies.
The economic and social costs of chronically high unemployment in the region have been on our radar for some time. And late last year, I emphasized that “the region can no longer afford the status quo.”
Creating opportunities for the private sector to provide more jobs is the major policy priority. As the Managing Director stressed, this is particularly important in those countries “where unemployment has been a problem for many years”.
We also need to accept that measures will be needed to ease the human costs of today’s social pressures. But, to ensure that these social protections can continue to be provided over time, the priority should be designing a well-targeted social safety net. In contrast to generalized subsidies that benefit everyone, well-targeted schemes provide assistance only to those most needy. This means assistance that targets people, not products.
In a recent interview (video below), I talk more about events in the region, the policy challenges, and what actions might help these countries recognize their full potential.