THE IMPACT OF STRUCTURAL OND MACROECONOMIC IMBALANCES ON THE FUNDAMENTAL TRENDS OF THE SOCIO-ECONOMIC DEVELOPMENT IN THE MIDDLE EAST AND NORTH AFRICA

Abstract

Structural and macroeconomic imbalances have been an inalienable feature of the socio-economic development in the Middle East and North Africa (MENA) since independence. Both types of disproportions produce a negative impact upon fundamental development trends in the region. Against this background, this paper analyses the structure and hierarchies of imbalances in the region of the Middle East and North Africa. The article argues that broad-range monitoring of fiscal and macroeconomic indicators can facilitate the identification of emerging imbalances and provide ways of overcoming them. The article contends that the natural and climatic and resource factors quite rigidly determined the economic profile of the region, which, in turn, predetermines the key structural and macroeconomic imbalances that affect MENA socio-economic development. The historical asymmetry in the development of the MENA states, which for a long time had been parts of the British, French and Ottoman colonial empires, with their economic or strategic roles determined by the overseas rulers, created prerequisites for the subsequent economic differentiation of the countries of the region. Over the years of independence, the uneven development of the initially similar agrarian-Bedouin economies has increased dramatically as a result of the socio- economic policies carried out by the sovereign governments in accordance with the resource capacities of each country. The authors categorise MENA countries, dividing them into five groups, depending on the nature and determinants of economic development. The authors insist that almost all the current social and economic problems of the region are related to its two fundamental specific characteristics: colossal rental incomes (mainly of oil and gas origin) and relative overpopulation. The article exposes main macroeconomic imbalances MENA states, demonstrating the asymmetry of intra-regional development and structural distortions of the economic and demographic nature. On the basis of complex fiscal and macroeconomic data analysis the authors identify the existing imbalances. The paper produces a critique of existing macroeconomic stabilization policies in MENA states and their attempts to overcome the existing imbalances. I. Abramova and L. Fituni provide an augmented assessment of the typical policy failures in MENA. The research results in a forecast of the dynamics of financial determinants of macroeconomic stability in the region and the authors’ vision of ways to overcome or limit the existing and imminent imbalances. The authors come to the conclusions that that MENA countries need to accelerate structural reforms in order to overcome imbalances and to achieve diversification of their economies. Expanding the opportunities for the national private sector and increasing its importance in the non- oil segment of the economy could help to alleviate the employment situation and increase the effective consumer demand.