HomeInterviewsESCWA: Arab economies can strengthen roots, spread their wings
By Hala Saghbini
February 22, 2022 4:47 am

ESCWA: Arab economies can strengthen roots, spread their wings

Tabet: We expect 3.2% growth in the Arab world in 2022
Mounir Tabet

Deputy Executive Secretary of the Economic and Social Commission for Western Asia (ESCWA), Mounir Tabet, affirmed that Arab economies are able to “deepen their roots and spread their wings.”

He reiterated the call for urgent economic diversification to include productive sectors that create sustainable and decent job opportunities for youth.

During his interview with Economy Middle East, Tabet said that facing the Coronavirus pandemic in the Arab region was subpar, “although some financially capable countries performed better.”

He expected economic growth in the Arab world at a rate of 3.2% in 2022. Additionally, he mentioned that this rate may improve in case of a rise in oil prices, an influential factor in the growth rate of the largest Arab economies.”

Tabet added, “Of course, countries with financial capabilities and strong healthy economies linked to the global economy will recover before others, and this applies to most of Gulf countries.

Below you will find the (English translated) text of the interview that Economy Middle East conducted with Tabet: 

The 2022 Arab Forum for Sustainable Development will be held in March under the theme “Recovery and Resilience.” How do you evaluate the recovery process carried out by ESCWA countries?


Undoubtedly, the greatest challenge for Arab economies, as is the case for most of the world’s economies, is managing the transitional phase from the Coronavirus pandemic to a new stage, which we call the “post-Covid stage”.

A lot of people talk about “Building Back Better”, but I prefer the principle of “Building Forward Better”. The difference between the two is clear. The first is that if we rebuild the wheels of the economy to what they were in the pre-covid era, but in an improved way so that our economy and society will come out of its crisis better.

Whereas the second frame of thought considers that the economic and social crisis resulting from the Corona pandemic has uncovered a structural defect in our economies, societies, and natural environment.

This imbalance has been accumulating for decades and is largely responsible for our repeated economic and social crises, which, undoubtedly, have been exacerbated by the pandemic, since no economic, social, or environmental dimension has been spared from them.

As a matter of fact, United Nations Secretary-General Antonio Guterres talks about the need for a new social contract worldwide and nationwide. In my opinion, we can find the structural foundations of this new social contract in the 2030 Agenda and the sustainable development goals adopted by most countries of the world, including Arab countries.

Recovery strategies


Accordingly, recovery strategies that adopt the sustainable development goals respond better to the principle of “Building Forward Better”, and the outcome of this recovery is more likely to be more sustainable, just, and inclusive, leaving no one from the community behind without benefiting from its positive results, based on the “Leave No One Behind” principle.

Returning to the recovery process of the ESCWA-affiliated countries, we should recommend the high level of political and administrative will of the Arab countries in their attempts to face the pandemic and address its economic, social, and even environmental consequences.

Stimulus spending


Arab countries collectively invested about $95 billion in stimulus packages, which they distributed as grants and loans, and supported most strata of society, as well as public and private institutions, on both the economic and social levels, each country according to its financial capabilities.

However, the rate of this investment did not exceed 4% of GDP, which, compared to the European investment (exceeding 22% of GDP) in facing the pandemic and its consequences), we need to consider it very low. This indicates that despite the political will in the ESCWA region, the financial resources did not reach the required level to manage the pandemic, or at least these resources were much less than those in other regions.

In fact, the Arab region was one of the least invested regions in the world after Africa. It is clear that facing the pandemic in the Arab region was below the challenge level, although some financially capable countries have performed better.

Perhaps the most revealing indicator is the vaccination rate. In the Arab world, the Covid-19 vaccination rates exceeded 60% in the Gulf countries, whereas it did not exceed 3% in the least developed countries.

Are you optimistic, especially when the IMF lowered its growth projections?


Growth levels in Arab countries were at an average of 3% before the crisis, with positive projections for Egypt (5.5%) and negative for Lebanon (-3%). However, it decreased during the pandemic by an average of (-6.2%) in the region. Here, too, we witnessed unprecedented negative projections, due to the accumulation of crises (Lebanon -37%) or armed conflicts (Libya 067.6%).

ESCWA expects economic growth of 3.2% in the Arab world in 2022. This rate may improve in case of an increase in oil prices, which constitute an important and influencing factor in the direction of the growth rate in the largest Arab economies.

However, our expectations today indicate that the global growth rate expected by the International Monetary Fund (4.4%) will exceed the growth rate in the Arab region by about 1.2%. These numbers are not encouraging despite the unilateral aspect of the GDP growth criterion.

Achieving growth rates


On one hand, we must point out that our growth rates need to be equal to the general rate of the world. On the other hand, it is not sufficient to refer to the growth rate alone to realize the correctness and sustainability of the recovery level.

These numbers make us repeat the call for the necessity of economic diversification to include productive sectors that create sustainable and decent job opportunities for the young generation who today enters the labor market and sees it without its expectations and ambitions.


Optimism, nonetheless


However, I am optimistic due to several factors, including:

  1. The ability of Arab economies to create job opportunities that meet the aspirations of the young generation, not just in terms of sustainable job opportunities with decent incomes, but also in terms of productivity and providing opportunities for creativity for young people to exhibit their talents and potentials and serve their communities, countries, and humanity as a whole.
  1. The ability of Arab economies to “establish their roots and unleash their wings.” By establishing roots, I mean that Arab economies have to invest in traditional sectors such as agriculture (to contribute to their food security), industry (to contribute to the adaptation of industrial products to their local needs), and tourism (to preserve the heritage and strengthen national identity while being open to the world at the same time). As for unleashing their wings, I mean adopting the foundations of the modern economy: digital economy, artificial intelligence, and the Fourth Industrial Revolution, without forgetting the importance of adopting environmental sustainability for the production process. In addition to these two principles, it is necessary to integrate with the global economy through international trade equations, foreign exchange, and fair, productive, and open global interdependence that ensures the proper use of the country’s natural, human, creative, and productive resources.
  1. The ability of Arab societies to create just and comprehensive social protection systems financed by fair and progressive taxes and the contributions of employees and institutions on transparent and fair bases subject to periodic accountability.
  1. The ability of Arab societies to find a formula (and institutions) to manage public affairs in a more transparent and fair manner, with no chance of corruption, but opportunities and foundations for all elements of society to participate in creating a better future for the benefit of all.

Which of the ESCWA member states can expect a faster recovery than others?


The member states that have the advantages that I mentioned as a basis for optimism, or that are working to create these advantages, are the countries for which I expect a faster recovery. Of course, countries that have financial capabilities and have strong economic links to the global economy will recover before others, and this applies to most of the Gulf countries. Egypt also has a great opportunity for an important recovery due to the investments it made in the past years. But countries that are in armed conflict or in large debt find themselves crippled and unable to recover adequately.

What is ESCWA doing to encourage countries in the region to transition to a circular economy?


The circular economy is a means to achieve the desired sustainable development by working towards achieving three goals, which are (1) economic growth, (2) social inclusion, and (3) environmental protection. This is at the core of Goal number 12 of the Sustainable Development Goals. ESCWA supports an increase in the circular economy in Arab economies through effective international, regional, and Arab partnerships, as well as national institutions. This occurs within different frameworks, most notably:

  • Providing data and information, analyzing it, and sharing knowledge about the progress made in implementing Goal number 12.
  • Developing tools to assist countries in assessing food waste.
  • Assisting countries in formulating evidence-based policies and legislation.
  • ESCWA is conducting studies on the energy transition, following the framework of the circular carbon economy.
  • Dissemination of successful experiences and technologies and capacity-building for effective national institutions.
  • Providing substantial and technical support. For example, ESCWA implemented the Regional Initiative for Promoting Small-Scale Renewable Energy Applications in rural areas of the Arab region, which aims to accelerate the transition towards a circular economy.
  • Providing a fertile environment for cooperation between member states and strengthening partnerships.

How can ESCWA countries address inflation and large imbalances in their budgets?


Nowadays, inflation is a global economic challenge that most countries are trying to tackle in various ways. The impact of inflation on Arab countries depends on several factors, including: the high level of demand, the high production cost, the interest rate and its impact on investment decisions, the stability of the local currency exchange rate, the nature, and depth of the connection between both the local and the global economies, etc.

These, in addition to other elements, are not controlled by a single team and therefore need local, regional, and international cooperation to be solved. In fact, this is possible with an increased level of transparency and efficiency in the institutions responsible for addressing the relevant part of this complex equation.

How can sustainable growth figures be reached at a time when any fluctuation in the oil market could impact the budgets of these countries?


In the short term, the increase in oil prices will reflect positively on Gulf states. But in the early stages of the pandemic, we witnessed a huge drop in demand for oil and its prices. Observers didn’t expect and was not without precedent. If anything, it indicates the instability of oil prices. Another factor affecting oil prices is climate change and the policies attempting to reduce CO2 emissions.

Since oil and gas are the main cause for these emissions, this general trend will eventually decrease the demand for these elements, and thus reduce the financial resources of oil-exporting countries, including Gulf states.

Therefore, Gulf countries that diversify their economies and reduce their dependence on oil as the primary financial source for public investments will be more able to manage crises resulting from fluctuation in oil demand and prices. This is a trend ESCWA advocates, as well as an increasing number of Gulf countries, which calls for optimism.

What is the impact of the UAE corporate tax on investments?


Private companies are primarily concerned with increasing their profits, which is affected by the tax policies of the countries in which you intend to invest. However, tax policies are not the only influencing factor.

Productivity is considered the most crucial element. In as much as the elements of productivity are present in any economic framework, this framework is more capable of attracting investments. Moreover, productivity is the ability to increase the value-added to any product, allowing the investing company to eventually increase its profits.

In contrast, there are economies that impose high taxes on profits, but investment capital remains due to high productivity. Several factors impact productivity, including human capabilities such as creativity, management, and inventing solutions for production, distribution, and marketing challenges.

Additionally, it is impacted by electronic infrastructures, the competitiveness, and the network of linkage, relations, and agreements in the concerned economy, in addition to political stability, transparency, investor confidence in the local judiciary, and the ability of the concerned departments to implement judicial decisions in settling disputes. These factors are in place in the UAE and in an increasing number of Arab countries.