Economic Challenges Facing Middle Eastern and North African Countries: An Overview

Abstract

Middle Eastern and North African countries face enormous economic challenges as the twenty-first century approaches. Stagnant real wages, deteriorating competitiveness, and rapidly growing populations and labor forces have left most countries in the region unable to deliver higher living standards to much of society. Yet the opportunities facing the region have never been greater — world trade is growing rapidly, capital flows to developing countries have never been higher, and regional integration options are many as a result of the evolving peace process and the European Union’s proposal for a free trade area in the Mediterranean. Why, after nearly a decade of negative per capita income growth, has the region been unable to muster sufficient reform momentum to sustain economic progress? Do important differences across countries hold lessons for the future? What are the social consequences of economic stagnation, and how might future adjustment costs be managed to protect the poor? How have individual countries in the region defined the challenges ahead? And what issues must be addressed to realize a more prosperous future?