Countries Eligible for World Bank Borrowing:
Algeria
Djibouti
Egypt, Arab Republic of
Iran, Islamic Republic of
Iraq
Jordan
Lebanon
Morocco
Syrian Arab Republic
Tunisia
Yemen, Republic of
* This section also reports on West Bank and Gaza.

Middle East and North Africa

Regional Context

In the second half of 1999, the region’s fiscal and current account balances improved, owing mainly to higher oil prices. Regional GDP growth was 2.2 percent for the year, with considerable differences across countries. For major oil exporters, the swift reversal in terms of trade was equivalent to an increase of over 5 percent of GDP, but fiscal prudence and lower oil export volume held growth to 1.5 percent. More populated oil exporters (Algeria, the Islamic Republic of Iran) fared slightly better with 2.7 percent growth, although drought in Iran hurt agricultural incomes and raised inflationary pressures. The more diversified economies (Jordan, Morocco, the Syrian Republic) also suffered from drought but managed growth of nearly 3 percent. Growth was significantly higher in the Arab Republic of Egypt and Tunisia (5—6 percent) following the recovery of traditional markets and a rise in tourism.

Despite these improvements, important challenges remain. Faster GDP growth is required to reduce unemployment and provide jobs for over one million young people entering the region’s labor markets annually. The public sector remains large, even in countries such as Jordan, Morocco, and Tunisia that have undertaken significant reforms to reduce the scope and improve the efficiency of public administration. Integration with the global economy lags well behind other developing economies in East Asia and Latin America. Furthermore, the fragility of the natural environment threatens to constrain economic growth, and absolute poverty is on the rise in some countries, as is the number of economically vulnerable groups.