Middle East jobs crisis risks fuelling unrest, IMF warns

Middle East jobs crisis risks fuelling unrest, IMF warns

The Middle East and north Africa must accelerate economic reforms and tackle an unemployment crisis among women and young people that risks fuelling wider unrest across the region, the International Monetary Fund has warned.

In a report published on Thursday, the fund highlighted the vast gender gap in the regional workforce. If this was narrowed “from triple to double the average for other emerging markets and developing economies”, the region’s economic growth could have doubled in the past decade, gaining $1tn in cumulative output, it said.

But labour market “outcomes” had not changed markedly in the past 15 years, according to the IMF. The region’s youth unemployment, the highest in the world at about 25 per cent, had “worsened significantly” since 2010 — the year before popular uprisings triggered upheaval across the Arab world.

“The time for a comprehensive reform agenda with specific policies has come,” Jihad Azour, the fund’s Middle East director, told the Financial Times. “The aspirations of people are not yet fully met . . . the question is, should we wait until we see another explosion or should we address the root cause of the problems?”

Required reforms included improving the business environment, easing access to finance, tackling corruption and revamping expensive, inefficient subsidy systems to better serve the needy and free state funds for investment to boost growth, Mr Azour said.

Labour force participation charts

With 60 per cent of the population aged under 30, an estimated 27m youths will enter the region’s labour market over the next five years, the IMF said.

Youth joblessness in eight countries is already more than 30 per cent, including in Saudi Arabia, the Arab world’s biggest economy, and Egypt, its most populous.

The situation is particularly intractable for women, who face cultural, legal and social barriers to working. Women in the region are three times less likely than men to be in the labour force, while the level of joblessness among young women is nearly 36 per cent, rising to 62 per cent in Saudi Arabia, the IMF said.

Getting more women into work was not only important economically but also has a “very strong impact on social stability and in terms of inclusion”, Mr Azour said.

The IMF report comes as the region is grappling with lacklustre growth, wide budget deficits and rising debt. Economic and political uncertainty caused foreign direct investment inflows to drop 53 per cent between 2010 and 2015, the IMF said.

Against this backdrop, anger is mounting over joblessness and cuts to state subsidies as governments struggle to balance their books after a prolonged period of subdued oil prices and political instability.

The frustration has sparked protests and strikes across the Middle East and north Africa in the past six months, including in Iran, Egypt, Tunisia and Jordan, where demonstrations forced King Abdullah to fire his prime minister in June. In the three Arab states, economic reforms have been implemented as part of IMF loan packages.

The fund insists the measures, which have led to rises in food, fuel and electricity prices in some countries, are necessary to create more sustainable and targeted subsidy systems and generate “inclusive growth”.

“The measures to address those [problems] in the past were not the right ones, because in many cases the response was increasing the level of employment in the public sector, which led to a situation where the state is not only the largest employer but it’s crowding out the private sector in many cases,” Mr Azour said.

States needed “the courage to go and explain to people why these reforms are important”, he added.

If governments boosted growth by 1.7 percentage points from the average of 3.6 per cent, the region’s unemployment rate could fall from 10.6 per cent to 8 per cent by 2030, the fund said. But if output and employment growth remained at today’s levels, joblessness would hit 14 per cent.

Alia Moubayed, an analyst at the International Institute for Strategic Studies, said improving the environment for the private sector was the “only solution for sustainable job creation”. Some countries were doing better than others, she said, citing Saudi Arabia’s pledges on privatisation and increasing the number of women in work.

But, she warned, the unemployment crisis was a “leading indicator of a potential wave of instability if it isn’t addressed”.

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