Commentaries
Fatih Özatay, PhD - [Archive]
Economic problems ahead for Egypt and Tunisia 24/03/2011 - Viewed 1889 times
Turkey is facing the same medium and long term problems with Egyptian and Tunisian friends making effort towards democratization.
Seventeenth annual conference of the Economic Research Forum (ERF) for Arab countries, Iran and Turkey was carried out in Antalya between March 20th and 22nd. In these conferences academic studies about the region are presented and debated. Further, experts are invited to the conference to make presentations on specific subjects. ERF is a research network based in Cairo.
The themes of this year's plenary sessions were as follows: 'Democracy and economic development', 'Do institutional constraints on policy-makers work?' and 'Political and economic transformation'. Famous economists out of the region made presentations in the first two sessions while in the third session speakers from Arab countries conveyed their opinions about the current state in the region and the future of the region.
Corruption escalated
I was invited to the conference as a discussant, but I participated mainly because I was willing to listen to the debates and opinions conveyed in the third session. Today, I will address the speech of Mustapha Nabli, one of the three speakers in the third session who was assigned as the President of the Central Bank of Tunisia after the protests.
He draws attention to three reasons underlying the recent developments in Egypt and Tunisia: first is the escalation of corruption in the recent years, increasing the perception of injustice and the reactions against unjust wealth. Second is the rise in unemployment among university graduates in particular, melting down the expectations for the future. Third is the role of technology in facilitating organizations: for instance, people can gather easily by communicating via mobile phones, e-mails or via twitter.
Economic instability
Mr. Nabli stressed that Egypt and Tunisia will face significant economic problems in the short term. He stated that the economy will contract and unemployment will increase in both countries. There are a couple of reasons for this: they expect a significant drop in tourism revenues and the net foreign capital inflows. Weakening of security and rise of uncertainties will severely damage investments. The amount of credits extended by banks already dropped and is expected to continue. Moreover, some production facilities were damaged.
This potential development is considered as the biggest risk hindering the revolution (though I think it is early to call this a revolution but this is how the speakers called it). Unemployment, which is one of the three underlying reasons for the revolution, will increase further with the revolution. Budget expenditures must be increased to manage the process and save time for establishing an irreversible path towards democracy. But this will raise the budget deficit and perpetuate the economic instability.
According to Navli, the main question to be answered in regards to the economic performance in the medium and long term is this: how can the long term growth rate that varies between 4.5-5% be raised to 7%? How can an employment-friendly economy be achieved? The answer to these two questions is in fact critical also for Turkey. It appears that Turkey is facing the same medium and long term problems with Egyptian and Tunisian friends making effort towards democratization.
This commentary was published in Radikal daily on 24.03.2011
