Arab Spring Hits Economies Hard in Middle East

While the political and social costs of Arab Spring have been counted carefully, the economic costs have yet to be examined as closely. Economists from HSBC attempted to do that this week estimating that the affected countries would lose $800 billion in output in the economy by the end of 2014.

The premise is the GDP in Bahrain, Egypt, Lebanon, Libya, Syria and Tunisia, all of which in some form felt the effects of unrest and revolution that swept the region during the past 24 months, will come in during 2014 at 35% less than it would if the turmoil have not taken place.

The report from HSBC said from 2011 to 2014, lost output would reach nearly $800 billion. Included in that said the report was lost life, weaker political institutions, foregone output in the economy, with the cost of Arab Spring having been extraordinarily high and continuing.

In Egypt, the outlook is bleak, as unemployment has accelerated even more since the revolution while the public finances of the country are in complete disarray. The Gulf monarchies pledged more than $12 billion following the ouster of Mohammed Morsi as the President of Egypt on July 3.

The economic growth projections have been upped by HSBC, but a risk exists that the space that has been provided thanks to aid might also slow fiscal reform.

The economic recovery has yet to take hold inside Tunisia, said the HSBC report. Libya is even worse both economically and politically as it attempts to revive its oil production.

The civil war in Syria is still taking place and its effects on the economy have spilled over into neighboring Libya.

However, in the oil rich GCC, things are different, which with the exception of Bahrain, has been spared the foundational rattling protests that spread in other countries.

Certain parts of the area, in particular Dubai, have been the beneficiaries of being safe havens in the region. HSBC has estimated that more than $500 billion in public spending this year in the region and a budget surplus overall of 9% of the GDP, as revenues from energy continue streaming in.

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