Description

The Middle East and Central Asia’s economic growth potential is slowing faster than in
other emerging and developing regions, dampening hopes for reducing persistent
unemployment and improving the region’s generally low living standards. Why? And is it
possible to alter this course? This paper addresses these questions by estimating potential
growth, examining its supply-side drivers, and assessing which of them could be most
effective in raising potential growth. The analysis reveals that the region’s potential
growth is expected to slow by ¾ of a percentage point more than the EMDC average over
the next five years. The reasons behind this slowdown differ across the region. Lower
productivity growth drives the slowdown in the Caucasus and Central Asia and is also
weighing on growth across the Middle East (MENAP); while a lower labor contribution to
potential growth is the main driver in MENAP. Moving forward, given some natural
constraints on labor, total factor productivity growth is key to unlocking the region’s
higher growth potential. For oil importers, raising physical capital accumulation through
greater investment will also play an important role.

More publications in this series: Working Papers

More publications by: Pritha Mitra ; Amr Hosny ; Gohar Abajyan ; Mark Fischer