The Financial & Economic crisis in the ESCWA Region: Moving Forward Bader Omar AlDafa Under-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 Development Trends Varied level of Economic & Technological Development Unequal progress towards MDGs Unequal impact of Financial Crisis on sub-regions Source: UNDP 2008 Data on Iraq N/A

GDP GROWTH (%) Impact of Crisis on GDP & Oil Price 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 p Change in 2009 Scenario 1Scenario 2Scenario 3 Unemployment Rate (%) World Middle East North Africa VULNERABLE EMPLOYMENT ( Share of total employment (%)) World Middle East North Africa 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 Responses Fiscal 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

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