How the Arab Spring Affects the Economy - Scholarship Essay Example

The Arab Spring has permanently changed the political and economic landscape of the Arab world hence, there is a seismic shift in the social and economic contract that governs the relationship between Arabic governments and the citizens. The impacts of the Arab Spring have not been similar. For example, the revolutions that occurred in Egypt and Tunisia have not been replicated with ease in other Arabic countries such as Yemen, Libya, and Syria (Effects of the Arab Spring, 12 July 2011).

            The economies of the affected Arab countries have been ravaged, thus in Egypt risks related to external financing have shot up significantly, with dwindling direct foreign investment and negativity of net portfolio flows. The resuscitation interventions initiated by the Egyptian Central Bank to rescue the Egyptian pound from the increasing inflation and capital outflows have resulted in a shocking decline in net international reserves. Libya, on the other hand, appears to be the worst hit as the escalation of the conflict grounded all the principal economic activities such as oil sales. It has been estimated that total costs in regard to the fiscal balance have been in excess of $6.5 billion. A sharp decrease in oil production, decline in local consumption as well as decrease in buying power have led to declining in the economy (Long-Term Ratings On Egypt Lowered To 'B' On Weaker Sovereign Policy Flexibility; Outlook Negative, 10 February 2012).

It is also projected that public expenditure will also drop by about $600 million as a result of weak and poor governance. The Tunisian revolution has also hit the economy of the country very hard as the most important sectors of the economy are barely surviving, thus mining; tourism, and fishing are not bringing revenues.