Determinants of Growth in Arab Countries

Why has growth performance of the Arab region been disappointing and mixed relative to other developing countries over the last fifteen years? This paper attempts to use the broader framework provided by recent empirical growth literature to measure the relative contribution of the main sources of growth in the Arab countries. It also addresses the issue of whether Arab growth pattern is unique or could be fully explained by means of a global framework. The paper

• analyses the recent growth pattern of the Arab region within an international perspective, using other groups of developing countries as a basis for comparison
• analyses the relative growth performance within the Arab region, by identifying the principal aggregate agents of growth and disentangling the regional from the global characteristics, it attempts to map out the micro-growth issues that need to be addressed by further studies at individual-country level

Conclusions include:

• the overall growth performance of the Arab countries has been both mixed and characterized by a higher degree of volatility compared to other regions of the world, this is due to fluctuations in world oil prices, droughts, workers' remittances, foreign aid and debt, and political factors such as civil and regional wars
• the quality of institutions and factor endowment tended to negatively affect the relative growth performance of the Arab countries in comparison with three comparator regions
• the quality of physical and human capital rather than their quantity explains the relatively lower Arab growth performance
• factor accumulation accounts for most of the growth performance for the period 1960-1997
• the degree of exposure to external shocks and the extent of economic diversification were relevant factors in explaining variations in growth performance within the Arab World

Recommendations include:

• Arab countries should substantially enlarge and diversify their economic base, along with enhancing their capacity to withstand adverse domestic and external shocks and lessen their exposure to the volatility that the region as a whole has experienced
• the Arab educational system should be reformed so as to be able to dispense the type of education and knowledge that is more in line with the requirements of modern market-based and open economies rather than one that prepares graduates for employment in the public sector
• closing the wide educational gender gap and reducing illiteracy among women in Arab countries should be a high priority on the agenda of policy makers
• policies of greater openness and integration in the world economy should be vigorously pursued simultaneously with appropriate domestic economic and institutional reforms at home