Monetary Regimes and Socioeconomic Stability: A Missing Link in the ‘Arab Spring’?

Abstract

The political and social uprisings that spread rapidly across the AW in early 2011 surprised many economists. At the end of 2010, Arab countries were seen as having ‘weathered’ the global financial crisis of 2008/2009 and having regained stability. Visible impacts of the global financial crisis in the Arab region were seen in Kuwait (the Gulf Bank of Kuwait suffered a bank run in October 2008) and the UAE (the capital flight and liquidity squeeze which culminated as the ‘Dubai Shock’ of December 2009). The main adverse impact of the global financial crisis over the region was a plunge in crude oil prices, which hit growth rates of GCC countries and weakened wealth spillovers from major energy-exporting countries in the region to other Arab countries. Nevertheless, during the period before the Arab Spring, the economy of net energy-importing countries in the region, which were seen as more vulnerable to negative external shocks, stayed stable without balance-of-payments concerns. IMF country papers on Arab countries in 2010, based on IMF’s Article IV consultations put forward an optimistic view, albeit cautiously, of the economic prospects for Arab countries in 2011. In summation, in the period immediately before the Arab Spring of 2011, Arab countries were believed to be on stable macroeconomic paths.