The Impact of the Arab Spring on the Economy - Term Paper Example

Impacts Of The Arab Spring On The Economy Introduction The Arab spring refers to a serious of citizen protests in some North Africa and Middle East countries that started in mid 2010 and ended in 2011. The Arab spring was caused by authoritarian governance and human rights abused in some of the countries. The revolutionary waves of public protests and wars spread from one country to another, and eventually leading to ousting of the long serving dictatorial regimes in the affected countries. There is no single cause that can be attributed to Arab Spring since citizens expressed dissatisfaction with the regimes, including impunity by the security organs, economic frustrations and injustices to the opposition (Anders 67). Other reasons that are attributable to the protests include rampant and endemic corruption by the ruling class, and suppression of the freedom of free speech in the countries. For instance, police brutality, extra-judicial imprisonment and limited political freedom due to dictatorial regimes were common in Egypt, Tunisia and Libya. Demographic structural factors such as extreme poverty, a large number of uneducated youths and unemployment caused the violent protests in Tunisia. The rapid growth of use of social networks and internet penetration in some countries allowed the citizens to have new avenues of debate and arranging public demonstrations outside regime control. In some countries, interim military governments had to be established following the violent killings and ouster of the autocratic governments and subsequent instability. Some countries affected by the Arab Spring include Tunisia, Algeria, Jordan, Oman, Egypt, Yemen, Bahrain, Libya, Morocco, and Syria. According to the International Monetary Fund, the affected countries collectively incurred more than US $ 56 billion in losses with about US $ 35 being lost through inflation, and rising business costs. The paper will discuss on the impact of Arab spring in different economies (Anders 10). Tunisia Protests against long serving President Ben Ali were sparked by the acts of a young street vendor who set himself on fire due to continuous harassment by the police authorities. Though the President responded to the demonstrations through shutting down the internet, arresting the demonstrators, reshuffling his cabinet and promising more job creation, the protestors were eager to oust him out of office. Ben Ali was forced to flee the country to Saudi Arabia together with his close family. Some notable political developments in Tunisia was the resignation of the Prime Minister, the disbandment of the political police, the release of political prisoners and subsequent election of the Constituent Assembly in October 23rd 2011 (Anders 66). Tunisian economy is hardly hit by the demonstrations and protests since tourists have to cancel their stay in the country due to insecurity. The protests led to joblessness since the majority of the population thrives on tourism related employment. According to International Monetary Fund estimates in 2011, 13 percent of Tunisia population was unemployed with youths forming 26 percent of the unemployed people. The Arab spring led to an increase in the inflation rate from 3.7 percent in early 2009 to about 5.5 percent at the end of 2011. As a consequence of numerous protests and demonstrations, the government debt and expenditure also increased thus altering the fiscal balance by $ 489 million. The gross national savings level declined by 2 percent while the government’s external debt increased by another $ 4 billion. The Arab spring completed halted the national industrial production that remained at 0 percent during the period thus causing the Tunisian government to incur 9- percent budget deficit (Amin 123). The newly elected National Constituent Assembly is currently facing a daunting challenge of regulating the fiscal expenditure and lowering the budget deficit as well as increasing employment levels in the economy. Due to the high fiscal deficit, the private sector can hardly get credit from the markets due to escalating interest rates. According to economic analysts, the new government should promote the competitiveness of the private sector and reduce the level of corruption in order to promote investments and generate funds for critical infrastructure development, health care provision and education (Amin 221). Egypt Peaceful civil demonstrations started on Tahrir Square with the citizens demanding liberation from high food prices, arbitrary crackdowns by the police and suppression of political freedom ((Korany and El-Mahdi 23). Though Mubarak regime tried to control the protests through curfews and violent shooting of the civilians, he was forced to resign on February 11th 2011 and later charged with ordering the shooting of the civilians. The Arab spring in Egypt had deep economic roots that include rising unemployment, high food prices and inequality in income distribution. Mubarak’s 30- year dictatorial rule had oppressed the opposition and media through arbitrary arrests and detentions. Some notable events were the resignation of Prime Ministers and suspension of the constitution. The ruling party (NDP) and state security investigation services were also disbanded thus allowing the military officials to assume power on an interim basis. Later, democratic elections were held and Mohamed Mursi was elected as the President (Korany and El-Mahdi 46). The Egyptian economy shrunk by 3 percent during the uprising while the stock market activity declined by 25 percent. Egypt witnessed a $ 30 billion in funds transfer to either Europe or North America due to the political and security uncertainty occasioned by the protests (Korany and El-Mahdi 56). The Tahrir Square demonstrations halted industrial production thus leading to estimated $ 1.7 billion losses and 45-percent decline in tourism activity in the country. With an interim military government, the focus was on political reforms and not economic growth, thus the economy only grew by mere 1.8 percent in 2011. The inflation rate rose to 11 percent while the unemployment rate was at 12 percent. The fiscal deficit jumped to about 8.7 percent of the Gross domestic product since the transitional authorities were concerned with financing the minimum wage and offering subsidies. International reserves fell from a high of $ 36 billion in late 2010 to a low of $ 15 billion in late 2012. External debt increased by $ 5 billion due to collapse of stock and tourism sectors. According to expert analysis, 90 percent of the unemployed people in Egypt are youths mainly aged below 24 years. According to El-Naggar, Mubarak spent heavily in crushing the protestors and released prisoners in the streets thus creating more uncertainty that drove away tourists and investors. In addition, the spring led to fears of emergence of Muslim-Christian violence due to the high involvement of the Islamists in ousting President Mubarak and the role of ‘Muslim Brotherhood’ in violence (Korany and El-Mahdi 87). The current government has taken some measures to boost minimum wages and increase the revenue collection through 10- percent capital gain tax. However, the government should boost the agricultural industry and provide subsidies to commercial enterprises in order to stimulate economic recovery (Korany and El-Mahdi 109). Libya Anti-government protests in Libya started on 15th February, 2011 due to arrest of human rights lawyers. Within days, opposition demonstrators had controlled Benghazi and many government officials started to defect to the opposition. Chaos in Libya was caused by 42-year regime of Muammar Gadaffi that had denied the citizens political freedom and equal opportunities in society. The regime was also accused of numerous human rights violations, detention, corruption and censorship of the free media. The United Nations Security Council imposed a no-fly zone and funded opposition forces through a NATO air campaign that was aimed at destabilizing pro-Gaddafi fighters. The opposition formed the National Transition Council that was tasked with spearheading political reforms and democratic elections. However, the current security environment in Libya remains uncertain due to the high number of arms in civilian hands and killing of American ambassador (Prashad 67). The Arab spring negatively affected Libya economy since oil exports stagnated and investors fled from the country. The e economy contracted by about 42 percent in 2011 but gained a recovery momentum in 2012 thus leading to 20-percent expansion (Prashad 88). Libyan has high unemployment, high economic inequality and poor governance structures thus leading to rampant government corruption and human rights abuses. The budget deficit moved from 8.7 percent of the GDP to a high of 17.1 percent of the GDP in 2011. The inflation rate also jumped from 2.5 percent in 2010 to 11.4 percent in 11.4, but the inflationary pressures eased back to 6 percent in 2012 due to opening of oil exports after the uprising. The interim government has earmarked several attempts of rebuilding the economy, especially the oil industry. However, the government faces high economic pressure since subsidies and wealth transfers have to be provided to the victims of the uprising. The restructuring policies must aim at social inclusion, employment creation, and good governance in order to ensure high economic growth and prosperity of Libya (Prashad 99). Syria The Arab spring broke out in Syria on 26th January 2011 after several internal conflicts. The demonstrators mainly demanded political reforms in order to facilitate equal rights for the Kurds, ensure political freedoms and freedom of the mass media. President Bashar al- Assad government responded by imposing emergency law and bombarding civilians with tanks including even confiscating the important necessities like water, electricity and flour (Althani 43). By October the same year, the death toll reached 2,900 civilians with more than 10,000 having been arrested. The dissidents established a network that included Kurdish factions, Syria Muslim Brotherhood and Damascus declaration group in order to pressurize the ruling President to step down. The Arab spring in Syria has left more than 2.5 million internally displaced and diplomatic challenges since countries like US and France have formally recognized the opposition National Coalition as the representative government of Syrian people. The termination of Official Arab Investments in Syria halted about $ 6 billion in commercial investments in the country and made that Syrian economy could only rely on the reserves to finance infrastructure projects. The tourism sector lost about 90 percent of hotel occupancy thus leading to 40-percent joblessness in the sector. Average food prices doubled while inflation rate reached 30-percent by June 2012 (Althani 111). The economic sanctions imposed by the international community have brought economic crisis that has led to a sharp decline in industrial production, consumption, and massive withdrawal of foreign direct investment in the country. The uprising has also stumbled the stock market and decline in the foreign exchange reserves of the country. In addition, Syria is currently facing a sharp decline in the value of the national currency due high food prices and reduction in oil exports. The uprising has also led to economic immigration, thus affecting the economies of the neighboring countries. The Arab spring has left Syria in critical need of emergency food distribution and emergency medical attention (Althani 76). Yemen Arab spring broke out in Yemen following some announcements by the ruling party that it was about to amend the constitution. Endemic unemployment, sluggish growth in the economy and widespread corruption accelerated demonstrations. The Arab spring of 2011 in Yemen exposed several long-standing economic structural weaknesses since the majority of the citizens cannot access basic commodities such as energy and water. National unemployment rate increased from a low of 15-percent before the protests up to 40-percent during the crisis. The real Gross domestic product declined by about 7.8-percent while the oil production stagnated to only 180,000 barrels per day from the previous average of 260,000 barrels of oil per day before the onset of the crisis. The inflation rate jumped to 30 percent from a low of 20 percent before the crisis thus pushing the prices of imported essential commodities like water and food out of reach for a majority of citizens. The GDP growth rate declined to negative 15.3 percent in 2011, while the production of non-oil sectors declined to negative 4.5 percent. The public debt also increased to 37.2 percent of the GDP compared to 30 percent of the GDP in 2010. The uprisings also led to decline in stock market activity and industrial production (Aissa 36). In February 2012, revolutionary movements attained power after the ouster of President Ali Saleh. The current economic hardships are affecting more than 10.3 million citizens with the new government promising to increase oil production and stabilize the currency. For instance, the government has promised to offer gasoline subsidies and reinforce the social protection for the poor. In the future, Yemen will need to diversify its economy since the country petroleum industry accounts for one quarter of the GDP and over 70 percent of government revenues (Aissa 89). Conclusion The Arab spring was caused by the demand of political freedom, human rights, democracy, and equality in numerous Arab countries that had for long been ruled by dictatorial rulers. The protestors aimed at ensuring the long term economic stability, respect for human rights and prosperity of their countries. Some of the post-revolutionary initiatives that have been put in place include strengthening the free media, creating employment for youths, fostering education and rule of law that considers human dignity to fair trials.. The protests stagnated the tourism industry in the North African countries and the oil production industry in the Middle East. According to the International Monetary Fund (IMF), the affected countries lost almost $ 56 billion in losses with about $ 35 being attributed to inflation pressures that led to increase in the prices of basic commodities. The fiscal spending pressures in the affected countries are likely to be high as new governments try to respond to the increasing inflation due to food and oil subsidies and increasing social protection spending. Due to the deteriorating investor confidence, the cost of external borrowing in the international capital markets has increased thus creating an additional financial burden to the affected countries. In some countries such as Libya, the delay in transition has caused political tension that has threatened the future political stability of those countries. However, IMF estimates that with the current economic recovery measures, most of the Arab spring countries will experience an estimated 2-percent growth in the GDP in 2013, with recovery expected by 2016. Works cited: Aissa, El Hassane. The Arab Spring: causes, consequences, and implications. New York. U.S Army War College. 2012. Althani, Mohamed. The Arab spring and the Gulf States: time to embrace change. London: Profile.2012. Amin, Magdi. After the spring: economic transitions in the Arab World. New York: Oxford University Press. 2012. Anders, Julien. The Arab Spring. London: AuthorHouse. 2012. Korany, Bahgat and El-Mahdi, Rabab. Arab spring in Egypt: revolution and beyond. Cairo: University of Cairo. 2012. Prashad, Vijay. Arab spring, Libyan winter. London: AK Press Publication. 2012. Read More