Middle East & North Africa

Recap of MEI event "Egypt: Lumbering State, Restless Society."

In response to the global pandemic, public authorities in Egypt responded with a comprehensive package aimed at tackling the health emergency and supporting economic activity. This column examines how private sector firms perceived ease of access to finance before and after the emergence of Covid-19 in 2020.

The Covid-19 pandemic has drastically disrupted people’s lives, livelihoods, and economic conditions around the world. The global shock has resulted in a tourism standstill (Djankov 2020), significant capital flight (Djankov and Panizza 2020), and a slowdown in remittances (Nonvide 2020), resulting in an urgent balance-of-payments need. Egypt responded to the crisis with a comprehensive package aimed at tackling the health emergency and supporting economic activity. The Ministry of Finance acted swiftly to allocate resources to the health sector, provide targeted support to the most severely impacted sectors, and expand social safety net programmes to protect the most vulnerable. Similarly, the Central Bank of Egypt adopted a broad set of measures, including lowering the policy rate and postponing repayments of existing credit facilities. The next section highlights the experience of firms in Egypt following these policies.

With rising population and incomes, the “rentier” mode of development in Saudi Arabia has long been unsustainable. While the issue of fiscal stabilization will occupy policy-making in Saudi Arabia in the short and medium terms, the long-term challenge of finding new sources of growth to complement oil has only been made starker by the recent drop in oil prices. Analysis of the prospects for such reforms in KSA has long been divided between two opposite camps: those who believe that the inadequacies of the rentier model will necessarily usher a doomsday scenario sooner or later, regardless of economic policies; and those who believe the impending crisis can be met by moving from the current mono-sector economy to a modern and diversified knowledge based economy OECD-style.

This report, the second Social Development Report from ESCWA, documents an increase in inequality of access to good quality education and to good jobs in several countries of the region, which may further entrench income inequalities. 

Using World Value Survey opinion poll data, we empirically characterize the economic values and norms held by individuals in the Arab world, in comparison to values held in the rest of the world. We find that, contrary to some common beliefs, there are many values that predispose citizens of Arab countries to be part of a market economy, including a high level of work ethics, comfort with competition and the work of markets, and a high level of economic motivation.

This paper looks at the relationship between banking and cronyism in Egypt. A key puzzle that it tries to resolve is why private banks may lend in preferential ways to politically connected firms. In doing so, it tries to identify the causal pathways that link bank lending decisions to the corporate characteristics of politically connected firms.

If oil prices remain low over the long term, the Middle East could suffer a macroeconomic shock of historic proportions. Although some countries in the region are better positioned for revenue shortfalls than others, all will have to make tough choices now to ensure future prosperity.