How will the Arab Spring affect Middle Eastern growth prospects in 2012?

The ongoing impact of the still reverberating Arab Spring protests, civil wars and revolutions on the economic outlook for 2012 was the broad theme of a seminar held in the Dubai International Financial Centre today using ‘Chatham House Rules’ that allow press reporting but not the attribution of actual quotations to individuals.

A little ironic from the champion of openness and transparency in corporate governance in the GCC, but nobody likes to be seen to be openly critical in the current environment. And so this opaqueness can actually encourage freedom of speech as commentators feel more able to speak out.

1970s’ timewarp

One opinion was that the UAE, Qatar and Kuwait are rich enought to stay trapped in a 1970s’ timewarp but that other countries in the region are going to be forced to move on if they want to achieve high enough growth to meet the demands of an increasingly vocal, and youthful population.

In five to ten years the economic success of the Oil States still seems assured with hydrocarbon wealth and dynamic demographics. The problem frankly is peering past the next 12 months that look anything but easy, either locally or globally.

Who knows what will happen in the eurozone sovereign debt crisis next week, let alone for the rest of 2012? This is a very great problem for economists who like to paint scenarios and duck tough questions. When pushed they tend to lay the responsibility on to others and argue that they are mere economic advisers and not policy makers!

But there is some consensus about the fragility of the so-called transformation economies of the Middle East, those like Egypt and Libya where the old guard has gone but nobody is too sure about what or who follows. For if you look at Eastern Europe or Central Asia for a paradigm it suggests three to five years would be a very quick transition and it could be very much longer.

Discouraging outlook

Further out and there is some optimism that the aspirational demands of the revolutions of the Arab Spring will be met. Yet it is strange how economists can produce long lists of what ought to be done in the region even if this is not actually a policy platform being engaged by any of the new governmental players.

ArabianMoney does not find this very encouraging. If you turn back the clock to another era in the Middle East then the economic result will be less and not greater economic success, and more poverty and lower standards of living. Economists can produce a prescription for something better if anybody is listening.

However, for 2012 the die is cast for a roll-over of the troubles from the previous year. That leaves oil prices high and the Oil States able to spend more to keep their populations happy. It sadly leaves problems unsolved in Syria, Yemen and Iraq, and a good many questions over the future in Libya, Tunisia and Egypt.

Foreign direct investment into Egypt fell from $5.6 billion in 2010 to $350 million last year. There is no roadmap or economic model for the future. How much progress is likely in these circumstances?

The regional outlook clearly depends very much on which country you are living in, and few generalizations apply. And add a eurozone sovereign debt crisis and European recession and the countries in North Africa will be particularly hard hit. That much at least the economists at the DIFC seminar could agree about.