Every year in October, the world’s top finance officials and global bankers gather to attend the World Bank and International Monetary Fund’s annual meetings. Walking the halls of the IMF and World Bank in Washington, attending plenary sessions and cocktail gatherings and smaller seminars, one can get a rough temperature of perceptions of the global economy by the leaders making policy. This year, that temperature is, well, lukewarm. As one senior finance ministry official from a European country told me on the sidelines of the meetings, “it feels like we still have room to grow, but we are scoring own goals with our policies, and just treading water, rather than moving forward.”
There is little heat in the global economy today, but we are not on the verge of an ice-cold recession either. The concern among IMF officials is one of a “synchronized slowdown.” The IMF downgraded its global growth forecast for 2019 to 3 percent, its worst performance outlook in a decade. And lest we forget, a decade ago, the world was reeling from a global financial crisis – and the Arab world was about to face an unprecedented uprising across several key countries.
Still, we are not on the verge of a drawn-out recession yet, according to the IMF. They expect global growth to recover to 3.4 percent in 2020, still somewhat tepid, but far from disastrous. The world economy seems to be, as the European official put it, treading water, moving forward in spurts, but ultimately held back by cross-currents.
The IMF’s chief economist, Gita Gopinath, pointed to “rising trade barriers and increasing geopolitical tensions” as key cross-currents driving a “synchronized slowdown.” More specifically, the IMF estimates that US-China trade tensions will reduce global GDP by 0.8 percent by 2020, the equivalent of wiping out the entire economic output of Switzerland or Saudi Arabia from the world economy. Gopinath also noted that “growth is also being weighed down by country-specific factors in several emerging market economies, and by structural forces such as low productivity growth and aging demographics in advanced economies.”
All of this seems reasonable, but for the vast majority of people worldwide gauging the temperature of the global economy is merely an abstract exercise. What they really want are improvements in their own economy, and across the Middle East and North Africa region, the picture does not look good. In fact, the economic picture looks remarkably similar to the year 2009 – high levels of youth unemployment and underemployment and economies buffeted by slowing macro conditions worldwide.
Ahead of the World Bank-IMF meetings, five key MENA countries have faced robust protests over the past few months. From Algeria to Sudan, from Iraq to Lebanon and to Egypt, a common theme has pervaded the protests across the region: frustration with the corruption of the ruling elite and the rising cost of living, as well as joblessness and precarious employment. Add to this the gathering storm of wealth and income inequality, rising smartphone penetration and social-media connectivity that allows more people to peer behind the palace walls, and you have a combustible mix.
Young Arabs between the age of 18 and 24 are overwhelmingly concerned about jobs. In fact, nine in 10 young Arabs rank unemployment as their chief concern, according to the most recent findings of the annual Arab Youth Survey, a poll that has consistently captured the mood of young people across the region.
The youth unemployment rate across the region neared 30 percent on the eve of the 2010-2011 Arab Uprisings. Today, that unemployment rate hovers above 30 percent. Despite the reams of policy papers published and the hand-wringing seminars about the importance of creating jobs for young people, we are basically where we started a decade ago.
All of this takes us back to the global economy. For the Arab world and other emerging markets, the fate of economies like China, Japan, the European Union and the United States – the big global stalwarts – matters a great deal because they soak up so much demand and their exporting companies often benefit from global supply chains. Tunisian companies are a key part of Airbus’s supply chain and Moroccan auto manufacturers benefit from European investment and buyers, to cite just two examples from North Africa. As for Middle East oil exporters, sharp slowdowns in Asia would hit their bottom lines hard as demand for oil and gas could slow.
When the global economy slows, it courses its way through emerging markets and the broader Arab world. So, the “synchronized slowdown” may seem like World Bank-IMF jargon, but it has real-world implications in a MENA region that desperately needs to create more jobs for a young and restive population. Recent bouts of protest from Cairo to Beirut to Baghdad are driven by local concerns, but they are tied increasingly to the slowing global economy.
Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies, and editor and founder of the New Silk Road Monitor.