Camdessus warns that Arab economies are falling behind

31 May 1996

The IMF's managing director Michel Camdessus has warned that Arab economies are falling behind developing countries as a group and Arab governments must be prepared to reassess the role of the state if they are to meet the needs of growing populations.

'Slower GDP growth and rapid population growth in the Arab countries has meant that, for the region as a whole, average real per capita income has virtually stagnated,' Camdessus told an Arab banking conference in New York on 20 May. 'Better economic performance.. will depend on a fundamental assessment of the role of the state.'

He said Arab countries' exports have grown at a very slow rate of only 1.5 per cent a year over the last five years, compared to average annual export growth of 10 per cent a year by the developing countries as a group and average annual growth in world trade of 6 per cent. Arab economies have attracted only a small amount of the private capital that has poured into the developing world in recent years.

Camdessus singled out some Arab countries for praise:

Algeria, 'whose steadfast implementation of its comprehensive stabilisation and reform programme since 1994, despite severe political and security problems, has helped produce the first increase in real per capita income in five years.'

Jordan, 'whose determined pursuit of prudent macroeconomic policies and structural reform since 1989 has resulted in strong, broad-based growth averaging 6 per cent in the last three years', as well as cut unemployment despite high labour force growth.

Tunisia, 'whose transformation.. into a predominantly market and export-oriented economy has made the country much more able to withstand external shocks', boosting real per capita incomes by 2 per cent a year since 1987.

Camdessus also noted the efforts of Morocco and Saudi Arabia, but he added:

'Despite such achievements, I am concerned that Arab countries as a group are operating below potential.'

Traditional sources of growth in the Arab world will be unlikely to provide the broadbased growth needed to create jobs for growing populations. The outlook for oil prices is unstable. 'The already pressing need for job creation in Arab countries is likely to intensify, since in some countries more than half the population is under the age of 15.'

The message, Camdessus said, was that Arab states must be prepared to grasp the nettle of structural adjustment and follow disciplined fiscal and monetery policies, cut spending, strengthen the tax base and free up the private sector. 'When the state dominates the economy, resources are often misallocated and private investment and growth suffer.Governments do have a role to play, but it is mainly an enabling one.'

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