Wednesday,15 August, 2018
Current issue | Issue 1405, ( 9 - 15 August 2018)
Wednesday,15 August, 2018
Issue 1405, ( 9 - 15 August 2018)

Ahram Weekly

Growth for all

Inclusive growth is the way out of poverty. This is the conclusion of recent economic conferences and research reports. In simple words, this means widening the base of beneficiaries of economic growth, via a focus on creating employment opportunities. It also includes making better essential services, like healthcare and education, accessible to the poor, together with widening social safety nets.

The experience of many countries in the last decade proves that making economic growth more inclusive guarantees its sustainability.

In the MENA region, where the average growth rate since 2009 has been one-third slower than the average during 2000-08, per capita incomes are left near stagnant, growing by only 0.8 per cent annually from 2013-16. This is accompanied by inadequate job opportunities, particularly for young people and women, and ongoing frustrations over the quality and accessibility of public services, says a recent IMF report entitled “Opportunity for all: Promoting growth and inclusiveness in the Middle East and Africa.”

The report underscores the fact that 26-51 per cent of the populations of MENA’s emerging and low-income countries still live in poverty, with poverty rates higher in rural and disadvantaged areas. Almost 60 per cent of the poor in Algeria, Egypt, Morocco, Sudan and the West Bank and Gaza live in rural areas.

Introducing fiscal reforms can help promote inclusive growth. Enhancing tax collection in MENA countries to the average level of emerging markets would put at the disposal of these countries, in order to fund social and infrastructure spending, more than nine per cent of GDP in many cases. Many countries are currently taking steps to raise revenues to fund their social and investment needs. Egypt, for example, is one out of 140 countries worldwide to introduce Value Added Tax (VAT).

Another reform is eliminating fuel subsidies. “For each one per cent of GDP in spending on energy subsidies in the MENA region that is redirected to infrastructure spending, the region has the potential over six years to increase its real GDP by two per cent and create 0.5 million new jobs. Also, by abandoning fuel subsidies, MENA countries can redirect it to a 40 per cent increase in social protection spending to bring the regional average spending on social protection to seven per cent of GDP,” adds the report.

Also, if the region could generate a 0.5 per cent increase youth employment per year, real GDP growth would accelerate to 5.5 per cent per year, and real per capita income would rise annually by 3.8 per cent.

Dealing with the gender gap in labour forces across the region is of key importance, the study noted. Reducing the difference between the number of male and female workers from triple the average rate for emerging markets to only double would have doubled GDP growth in MENA over the past decade — around $1 trillion in cumulative output.

Increasing finance availability for MENA’s small- and medium-sized enterprises to the emerging market average would provide more than $300 billion for additional private sector investment in the region.

The report also highlighted a number of priorities to achieve inclusiveness. Enhancing accountability, through increasing transparency and strengthening institutions to control corruption and ensure shared responsibility for inclusive policies, is vital.

Second, it calls for promoting the private sector through better regulation to build a vibrant economy. Leveraging technology and attracting foreign investment to diversify and develop new sources of growth and job creation is a third target that MENA countries should be working towards.

Making sure that no one is left behind is a prerequisite for inclusive growth — an aim that can only be achieved by building strong safety nets and empowering disadvantaged groups, including youth, women, rural populations and refugees.

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