The 2019 Annual Meetings of the African Development Bank Group will be held from 11-14 June 2019, in Malabo, Republic of Equatorial Guinea. Find out more
A recent Economic Brief produced by African Development Bank, “Promoting crisis-resilient growth in North Africa”, analyses the root cause behind the Arab Spring and concludes that the uprising was an internally generated crisis, the result of two interwoven processes relating to the patterns of growth and crisis resilience in the region.
While North African countries enjoyed moderately high growth between 2003 and 2010, notwithstanding the two crises (food and financial) that hit the region during that period, growth was not inclusive and benefits were not shared broadly across sectors or widely across groups. North African governments took steps to strengthen crisis resilience at macroeconomic level; however, they generally failed to protect small businesses and poor households.
Hence, instead of promoting crisis-resilient growth, North African government policies have been producing growth-inhibiting crises. The Arab Spring caused more damage to North African countries’ growth trajectories and fiscal capacities than the two previous crises combined. The internally generated crisis also weakened sectors that had previously appeared resilient to external shocks – suggesting that crisis resilience is not possible over the long term unless inclusive growth is a part of the overall strategy.
Economic and social policies were not fundamentally changed in many countries of the region following the transition ignited in early 2011, most North African countries continue to be exposed to domestic instabilities that could affect their future development patterns. Moreover, their heavy reliance on Europe for trade and capital flows leaves them highly vulnerable to the Eurozone debt crisis.
This brief provides details of policy measures that other countries have successfully introduced to promote social stability, high growth and crisis resilience. Its recommendations are set out according to the constituents of crisis-resilient growth: strengthening adaptive capacity, reducing systemic vulnerability, and expanding the drivers and distribution of growth.
· To strengthen adaptive capacity, North African governments should (i) continue to implement well balanced monetary and fiscal policies; (ii) redesign social policies and transfer programmes, so that they target and protect vulnerable households; (iii) reform formal and informal education systems to deliver high-quality, relevant skills; and (iv) ensure that state institutions are more inclusive and responsive.
· To reduce systemic vulnerability, North African countries should: (i) diversify trade and financial partners; (ii) increase investments in agriculture and alternative energy sources; (iii) support the growth and development of SMEs; and (iv) develop and/or strengthen crisis monitoring tools.
· To expand the drivers and distribution of growth, North African governments should: (i) continue to pursue trade liberalisation and privatisation, but ensure that measures are in place to lower the risks associated with greater global integration; (ii) remove the legal and regulatory impediments to formal private sector growth and employment; (iii) promote diversification across sectors; and (iv) adopt policies that increase private sector productivity and competitiveness.