Growth Erosion in MENAP during 2000–2018: Reasons and Remedies

Alexei Kireyev

doi:10.1515/rmeef-2020-0010

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Growth Erosion in MENAP during 2000–2018: Reasons and Remedies

Alexei Kireyev

Published/Copyright: July 2, 2025

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From the journal Review of Middle East Economics and Finance Volume 21 Issue 2

Abstract

The paper examines the reasons for growth erosion in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region in the period preceding the Covid-19 crisis. Over the past two decades before the crisis the regions’ growth has been lower relative to its peers, despite facing similar circumstances as those countries, such as low oil prices and weak external demand. The paper argues that key reasons for growth erosion in MENAP have been domestic, primarily negative total factor productivity, weak preparedness for shocks, insufficient fiscal buffers, unsystematic fiscal adjustment with arbitrary cuts in investment, and low investment efficiency. External factors—the decline in oil and other commodity prices, weak external demand, and geopolitical tensions—have also been important, but mainly for oil exporters. Key policy options to reinvigorate growth include leveraging technology and trade to improve productivity, developing a macroeconomic risk management system, implementing growth-friendly fiscal adjustment, improving growth inclusiveness, and fostering the private sector.

Keywords: growth; inclusiveness; technology; trade; oil price

JEL Classification numbers: D30; E21; E62; I32

Corresponding author: Alexei Kireyev, Former senior IMF economist, Washington, USA, E-mail: akireyev@hotmail.com

The author is grateful to M. Cherif, J. Gottschalk, N. Gueorguiev F. Diaz, R. Duval, A. Hegazy, A. Hussain, S. Lall, A. Mansoor, E. Mottu, C. Purfield, A. Tiffin, and MCD inclusive growth group for helpful comments. Any remaining errors are the author’s. The views expressed are those of the author and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Appendix Growth in Individual MENAP Countries, 2000–2017 (Standard Deviation).

Extreme growth variability among MENAP countries points to several common trends: – Across time, growth in oil exported has been on average three times more volatile than in oil importers. Libya and Iraq have been the two oil-exporting countries where annual growth fluctuated from −125 to +67% and from −8 to +82% respectively. Among oil importers, growth in Sudan and Afghanistan from −18 to +11% and from 1 to 21%, respectively. – Across countries, in each given year growth variability in oil exporters has been almost four times higher than in oil importers. For both groups of countries, 2012 was the year with the most variable growth rates across countries. Oil exporters also experienced growth variability in 2003, 2011, and 2016. Among oil importers growth was the most variable in 2006 and 2009, but its magnitude was still nothing close to oil exporters.

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Received: 2020-02-16

Accepted: 2021-01-17

Published Online: 2025-07-02

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Articles in the same Issue

https://doi.org/10.1515/rmeef-2020-0010

Keywords for this article

growth; inclusiveness; technology; trade; oil price