How the Middle East Can Escape the Middle-Income Trap
The Middle East and North Africa urgently needs a new social contract focused on economically empowering the hundreds of millions of youth who are expected to join the labor market in the coming decades. The key to success will be technological adoption, adaptation, and innovation, encouraged and facilitated by governments.
WASHINGTON, DC – For developing countries, achieving middle-income status is both a blessing and a curse. While extreme poverty and deprivation have been overcome, what typically follows is a growth slowdown that, historically, has made further progress toward high-income levels exceedingly rare. That has certainly been the case for the largely middle-income countries of the Middle East and North Africa (MENA). But is there a way out?
Over the last 50 years, MENA countries have faced economic slowdowns and even stagnation. While many of these economies, especially those that are dependent on hydrocarbon exports, have experienced periods of stronger growth, no durable catch-up has occurred.
The pervasiveness of the middle-income trap among MENA countries points to common structural impediments to growth. In particular, all suffer from a lack of private-sector dynamism, owing to their lack of will or ability to adopt the latest technologies. This has precluded sustained productivity growth, without which it is impossible to sustain an increase in overall living standards.