Unemployment remains major problem across MENA region: Western Union

Ahram Online, Wednesday 20 Jun 2012

Reforms in the financial sector and the way remittances are dealt with are crucial to creating sustained growth across the Middle East, says a new study

Egypt migrant
Egyptian migrant worker at a refugee camp near the Tunisian border (Photo: Reuters)

Labour markets in Arab nations that have seen uprisings are facing major disruptions, with soaring unemployment exacerbated by large-scale return of migrants from other troubled countries, a study from a leading global money transfer company shows.

The study, released by Western Union on Tuesday, highlighted the importance of remittances as one of the most resilient sources of foreign currency and one requiring greater attention from policymakers.
Entitled 'Economic Impact of Uprisings on the MENA Region', it makes a link between oil prices and remittances, reflecting the fact that many Arab workers work in oil-rich countries. 
It also shows how high energy prices have hit major oil-importing Arab countries, such as Egypt, especially when it comes to their balance of payments and budget deficits. 
Other MENA countries such as Jordan and Lebanon are expected to face similar problems, albeit to a lesser extent.
Regional economies that did not witness social and political unrest were also negatively affected by increased oil prices, inflationary pressures, and widening budget deficits to accommodate increased social spending and food and oil subsidies.
With over 3.7 million emigrants working in foreign countries, Egypt recorded one of the highest inflows of remittances in absolute terms in 2010. A total of $7.7 billion was sent to Egypt, second only to Lebanon which saw $8.2 billion in inflows. 
Saudi Arabia, Jordan and Libya are the top three destinations for Egyptian emigrants, the study shows. 
Egyptians working in Libya sent home LE1.5 billion in 2010, but the uprising in February the following year prompted over 104,000 Egyptians to return home - a move with serious implications for both the flow of remittances and unemployment levels in Egypt.
The study further revealed the role of unemployment in sparking the revolutions in Egypt and Tunisia, stressing that it continues to be a major problem in many MENA countries and carries a range of social and political consequences. 
Egypt's unemployment increased to 11.9 per cent in the first quarter of 2011. This compared to 8.9 per cent in the fourth quarter of 2010, and 9.1 per cent in the first quarter of that year. 
The study made some economic recommendations for the MENA region, including that remittance-receiving countries set specific policies to deal with the government's share of such payments. It claims that MENA countries have historically not used them to finance productive investments.
It also recommended financial sector reform, including widening access to credit for small and medium-size enterprises, and addressing the issue of non-performing loans.
The financial sector in many MENA countries remains underdeveloped, with banks playing the main role as a source of financing, the reports says. This makes it crucial to introduce other financing sources, diversify risk and enhance risk-management techniques.
The study also predicts a sharp rise in MENA-wide inflation, saying monetary policy alone is unlikely to be able to batte inflationary pressures.
Short link: