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Middle East and North Africa Economies Are Growing but Need to Continue With Structural Reforms to Keep Up In an Increasingly Competitive World

June 30, 2008

Washington June 30, 2008 — According to Economic Prospects and Developments 2008, the GDP of the Middle East and North Africa (MENA) region grew by 5.7 percent in 2007, marking the fifth year in a row that average growth was above 5 percent. While this is impressive in relation to past performance, it is lower than growth achieved in most other parts of the developing world. To keep up in an increasingly competitive global environment, the region will have to continue to make structural reforms in business climate, trade policy and governance.

"Despite notable improvements in the business climate in some countries such as Egypt and Saudi Arabia, as a whole the region has failed to keep pace with business climate reforms elsewhere," said Carlos Silva (Lead Economist). He added: “Regardingtrade reforms, substantial progress has been made in reducing tariffs and the time required for import and export processing yet non-tariff barriers remain high and many aspects of trade logistics performance, reflecting the quality of customs, ports and transport arrangements, still need to be addressed.”
The report notes that progress with regard to governance has been mixed. On the one hand, the quality of public administration remains relatively high in MENA, ranking above East Asia, Latin America, South Asia and Sub-Saharan Africa. On the other hand, the quality of public accountability remains relatively low in MENA, ranking below all other regions of the world. However, in terms of reform efforts devoted to improving accountability, MENA ranked in the 67th percentile, above all other regions. This reflects a range of recent improvements in combating corruption, addressing weaknesses in the judiciary, improving property rights, and streamlining bureaucracy, especially among the GCC countries.
On the impact of rising food prices, Farrukh Iqbal (Sector Manager) said that this varies from country to country: "Low income countries that are relatively big food importers in terms of proportion of imports and consumption are at highest risk: examples include Djibouti and Yemen.” He added: “Some countries are feeling the pressure of increasing food prices directly in national budgets. For example Egypt, Iran, and Syria have seen food subsidies claim shares of between 4 - 8 % of their budgets in 2007. Among GCC countries, the main manifestation of food price increases has been in inflation."
The thematic focus of this year’s report is intra-regional integration. This is viewed not just as a set of preferential trade agreements but also as a means to foster the flow of labor, capital and investment. The report suggests the adoption of a paradigm of open regionalism in which regional preferences would be used as stepping stones for global integration and competitiveness.

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