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The Financial & Economic crisis in the ESCWA Region: Moving Forward
Bader Omar AlDafa
Under-Secretary-General, Executive Secretary UNESCWA
Characteristics of ESCWA Region
14 Member Countries
Natural Resources
• Large Oil and Gas Reserves • Water Scarcity & Arid Environment • Net importers of Food
Human Resources
• High population growth • Young population Education level varied • Large number of migrant workers
Diverse ESCWA Membership
1 0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0 180 160 140 120 100 80 60 40 20 0 Source: UNDP 2008
Data on Iraq N/A
Development Trends
• • Varied level of Economic & Technological Development • Unequal progress towards MDGs Unequal impact of Financial Crisis on sub-regions
Impact of Crisis on GDP & Oil Price
GDP GROWTH (%) 3 2 1 0 7 6 5 4 ESCWA GCC More Region 2008 Countries Diversified 2009 Countries
$160 $140 $120 $100 $80 $60 $40 $20 May-07
OPEC OIL PRICE (USD)
Sep-07 Jan-08 May-08 Sep-08 Jan-09
Trend: May 2007 – May 2009
May-09
Key Messages:
• GDP expected to fall from 6.1% to 2.1% • Demand for Oil expected to remain low despite price drop • Inflation expected to drop from 12 % in 2008 to 6 % in 2009.
Impact of Crisis on key Sectors
Trade & Foreign Direct Investment (FDI): :
•
GCC:
Export revenues to decrease b/c oil •
Non-GCC
: affected by recession in EU and US • Expected Significant decrease in FDI inflows (-21% in 2008)
Stock Markets and Banking Sector:
• Indices declined sharply by 50% in 2008, continuing trend in 2009 • Banks remain well capitalized & ratio of non performing loans to total is less than 5%
Impact on Unemployment & Poverty
Poverty :
• • Relatively low $1/day poverty rates but significant at $2/day
Remittances
to contract in 2009 due to loss in employment and falling real wages – impact on household poverty.
Unemployment: 2007 2008p Change in 2009
Scenario 1 Scenario 2
Unemployment Rate (%) World Middle East North Africa 5.7
9.5
10.6
5.9
9.0
10.0
6.5
8.8
9.8
VULNERABLE EMPLOYMENT ( Share of total employment (%)) World 50.4
49.4
48.9
Middle East North Africa 33.4
37.6
32.8
36.8
32.6
36.4
6.8
9.3
10.9
50.5
33.7
40.7
Source: ESCWA-ILO (June 2009)
Scenario 3
7.4
11.0
11.1
52.8
39.3
42.4
National Responses
Fiscal policies:
to boost domestic and global demand
• GCC governments have announces large programmes of investment in infrastructure and real estate; • More diversified countries also announced fiscal stimulus packages – including through construction projects.
Monetary & banking policies:
to maintain liquidity
• GCC Central Banks cut investment rates & lowered reserve requirements • Sovereign wealth funds (SWFs) focus on injecting liquidity
Social Protection:
to cushion impact on most vulnerable
• Few effective social safety net measures in place, such as social assistance programmes, to deploy or scale up targeted support to the poor;
Regional Responses
• League of Arab States’ Economic, Development and Social Summit (Kuwait, January 2009) • OPEC Meeting (Vienna, March 2009) • Arab Economic Forum (Beirut, April 2009) • ESCWA-ILO High Level Conference on the Financial and Economic Crisis (Damascus, May 2009)
The Damascus Declaration (May 2009)
• • • • •
Key Recommendations to Member Countries:
Adopt sustainable expansionary fiscal policy to boost domestic demand; Support the private sector, esp. SMEs; Enhance efficiency of regulatory frameworks in the financial sector to serve real economy; Encourage national, regional & international funds, as well as sovereign wealth funds, to provide liquidity and increase investments; Diversify exports, investing in technology & facilitate intra-regional trade flows.
ESCWA Role in Promoting Development
A. Support Evidence-Based Policy Making -
Contribute to the availability of relevant and accurate data (disaggregated by age, gender, etc.) - Provide analysis and policy recommendations
B. Promote Regional Integration for coherence in addressing the impacts of the Crisis C. Encourage South-South Cooperation D. Promote Public-Private Partnerships , and linkages with Civil Society & Academia