New governments of the Middle East should bury rentier economies once and for all. But how would they do that?
With the elections in Tunisia resulted without any stain and Gaddafi met his demise (although this blog strongly condemns the way he was killed), a new question comes to minds: What should the new Middle East economy look like?
In our previous post, we tried to commence this discussion. We argued that oil economy is not sustainable and undermines the productivity of the resources of a country. It is vulnerable to manipulation and leads to exploitation of resources and causes over-consumption. But there is more than that. Monolithic economies also escalates fragility for supply shocks particularly driven by political turmoils. For instance, Tunisia and Egypt are expected to have a sharp decline in economic growth in 2011. (0.007 percent and 1.2 percent respectively. Source: IMF) This is mainly due to the dramatic fall in tourism revenues and FDIs triggered by the upheavals. (Current Account Deficit Tunisia: 2.8 Billion USD, Egypt: 4.7 Billion USD. -2011 forecasts Source: IMF). That was also the case for Libya in 2008 when oil prices hit bottom due to the global financial crisis. The country’s economy shrank by 2 percent in 2009.