The Financial & Economic crisis in the ESCWA Region: Moving Forward Bader Omar AlDafa Under-Secretary-General, Executive Secretary UNESCWA.

The Financial & Economic crisis in the ESCWA Region:

Moving Forward

Bader Omar AlDafaUnder-Secretary-General, Executive Secretary UNESCWA

Characteristics of ESCWA Region

Natural Resources• Large Oil and Gas

Reserves

• Water Scarcity & Arid Environment

• Net importers of Food

Human Resources• High population growth

• Young population - Education level varied

• Large number of migrant workers

14 Member Countries

Diverse ESCWA Membership

00.10.20.30.40.50.60.70.80.9

1

Kuw

ait

UA

E

Bahr

ain

Qat

ar

Om

an

Saud

i Ara

bia

Leba

non

Jord

an

Syri

a

oPt

Egyp

t

Yem

en

Suda

nHum

an D

evel

opm

ent

Inde

x (H

DI)

020406080100120140160180

HD

I ran

k (o

f 179

cou

ntri

es)

Development Trends• Varied level of Economic & Technological Development• Unequal progress towards MDGs• Unequal impact of Financial Crisis on sub-regions

Source: UNDP 2008Data on Iraq N/A

01234567

ESCWARegion

GCCCountries

MoreDiversifiedCountries2008 2009

GDP GROWTH (%)

Impact of Crisis on GDP & Oil Price

$20

$40

$60

$80

$100

$120

$140

$160

May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09

OPEC OIL PRICE (USD)

Trend: May 2007 – May 2009

Key Messages:

• GDP expected to fall from 6.1% to 2.1% • Demand for Oil expected to remain low despite price drop• Inflation expected to drop from 12 % in 2008 to 6 % in 2009.

Impact of Crisis on key Sectors

Trade & Foreign Direct Investment (FDI): :• GCC: Export revenues to decrease b/c oil• Non-GCC: affected by recession in EU and US• Expected Significant decrease in FDI inflows (-21%

in 2008)

Stock Markets and Banking Sector:• Indices declined sharply by 50% in 2008,

continuing trend in 2009 • Banks remain well capitalized & ratio of non-

performing loans to total is less than 5%

Impact on Unemployment & Poverty

2007 2008p Change in 2009

Scenario 1 Scenario 2 Scenario 3

Unemployment Rate (%)

World 5.7 5.9 6.5 6.8 7.4

Middle East 9.5 9.0 8.8 9.3 11.0

North Africa 10.6 10.0 9.8 10.9 11.1

VULNERABLE EMPLOYMENT ( Share of total employment (%))

World 50.4 49.4 48.9 50.5 52.8

Middle East 33.4 32.8 32.6 33.7 39.3

North Africa 37.6 36.8 36.4 40.7 42.4

Source: ESCWA-ILO (June 2009)

Poverty :

Unemployment:

• Relatively low $1/day poverty rates but significant at $2/day• Remittances to contract in 2009 due to loss in employment and falling real wages – impact on household poverty.

National ResponsesFiscal policies: to boost domestic and global demand

• GCC governments have announces large programmes of investment in infrastructure and real estate;

• More diversified countries also announced fiscal stimulus packages – including through construction projects.

Monetary & banking policies: to maintain liquidity

• GCC Central Banks cut investment rates & lowered reserve requirements

• Sovereign wealth funds (SWFs) focus on injecting liquidity

Social Protection: to cushion impact on most vulnerable

• Few effective social safety net measures in place, such as social assistance programmes, to deploy or scale up targeted support to the poor;

Regional Responses

• League of Arab States’ Economic, Development and Social Summit (Kuwait, January 2009)

• OPEC Meeting (Vienna, March 2009)

• Arab Economic Forum (Beirut, April 2009)

• ESCWA-ILO High Level Conference on the Financial and Economic Crisis (Damascus, May 2009)

The Damascus Declaration (May 2009) Key Recommendations to Member Countries:

• Adopt sustainable expansionary fiscal policy to boost domestic demand;

• Support the private sector, esp. SMEs;

• Enhance efficiency of regulatory frameworks in the financial sector to serve real economy;

• Encourage national, regional & international funds, as well as sovereign wealth funds, to provide liquidity and increase investments;

• Diversify exports, investing in technology & facilitate intra-regional trade flows.

ESCWA Role in Promoting Development

A. Support Evidence-Based Policy Making- Contribute to the availability of relevant and accurate data (disaggregated by age, gender, etc.)

- Provide analysis and policy recommendations

B. Promote Regional Integration for coherence in addressing the impacts of the Crisis

C. Encourage South-South Cooperation

D. Promote Public-Private Partnerships, and linkages with Civil Society & Academia

THANK YOU