Climate crisis fuels change in MENA region

Freedom and Prosperity Around the World

February 26, 2024 • 9:00 am ET

Climate crisis fuels change in MENA region

Rabah Arezki

Table of contents

Evolution of freedom

The countries of the Middle East and North Africa (MENA) region are stuck in economic and political transitions toward more open economic and political markets. The lack of economic freedom has long echoed the lack of political freedom in the region. To maintain the status quo, political elites have for many years sought to cultivate an enduring social contract wherein economic and political elites capture economic rents—including from oil revenues—and citizens receiving patronage spending have tended to look the other way.

That is evident from the overall freedom score for the region, which has remained considerably lower than the global average. Indeed, the MENA region’s freedom score in 2022 is the same as two decades before (around 46.9), 15.4 points below the global average. That said, an increase in the freedom score is evident at the beginning of the period of analysis (from 1995 to 2002) which coincided with a wave of both economic and political reforms.

While there are important cultural and legal similarities among MENA countries, the region is also heterogeneous in many ways. Three distinct groups have progressed at different speeds in their economic transitions: the high-speed group, mostly composed of Gulf Cooperation Council (GCC) countries; moderate-speed, mostly composed of North African countries plus countries like Jordan and Lebanon; and the low-speed group, which includes conflict or post-conflict countries. Indeed, the GCC countries, which are mostly nonpopulous economies with vast wealth, have outperformed the other two groups, increasing their average freedom score by 6.7 points over the sample (1995–2022). The “moderate-speed” group of countries in North Africa, plus Jordan and Lebanon, includes both oil-importing and oil-exporting states, with a mixed record of economic reforms. Most of these countries are populous, with Egypt home to the largest population in the region. The conflict and post-conflict group includes Iraq, Libya, Syria, and Yemen, each with a complex history of civil wars coupled with foreign invasions.

The diversity of circumstances is evident when considering the evolution of the economic freedom score. The regional score has increased by 5 points throughout the period, driven by improvements in women’s economic freedom and, recently, investment freedom. This increase is mainly driven by progress in the GCC group of countries, where economic freedom went up by 14.5 points. The GCC is now led by Saudi Arabia, which has embarked on an important economic and social transformation agenda. In the “low-speed” group, we see an overall decline over the period (−3.7 points). Across the region, trade freedom presents a significant negative trend since 2011, losing almost 15 points.

On the political freedom front, the region is home to the world’s last absolute monarchies, whose transition to constitutional monarchies has been slow, and at times reversed. Military involvement in politics is all too common and has been on the rise. The wave of protests that spread through almost the entire region and which came to be known as the Arab Spring is apparent in the data. The Arab Spring erupted in the early 2010s from the frustration of a young and educated population aspiring to more political and economic freedom and prosperity. The hope raised by the Arab Spring proved, however, to be temporary. Indeed, protests ended up either tamed by autocrats or resulted in internal conflicts, with foreign interventions supporting opposing sides. The political freedom score shows an increase starting in 2010, which has vanished by 2014. All indicators of the political freedom subindex have been affected. This shows that countries in the region are stuck in political transitions toward democracy. 

Legal freedom is relatively low in the region, with all its indicators except informality scoring below 50 in 2022. Most indicators of legal freedom have had a flat trend in the last decade, showing no signs of improvement. Here as well, the GCC countries score higher than the other two groups, with a stable score over the sample. In the other two groups, legal freedom is declining. Just as on the political front, legal reforms toward more fair and inclusive systems have stalled. 

From freedom to prosperity

The prosperity score of the MENA region has clearly diverged from the global average during the period 1995–2022. Overall scores mask important differences between countries in MENA, especially along economic lines. Indeed, the MENA region has the largest reserves of oil and other hydrocarbons in the world. But not all countries in the region are rich in oil. The region is host to both oil importers and oil exporters, and the impacts of oil shocks far outweigh any policy intervention. Evidently, persistently high oil prices—albeit remaining volatile—have been good news for oil exporters and somewhat bad news for oil importers in the region. However, the reality is not always so straightforward, as high oil prices result in large and positive spillover effects from oil exporters to oil importers, especially in terms of remittances and foreign aid, and these have tended to mitigate the differences between the two groups.

While the consequences of oil market fluctuations continue to play a dominant role in driving prosperity in the region, that situation is clearly not sustainable as the world economy is firmly embarking on a transition away from fossil fuels. The MENA region scores higher than the global average in income, health, and environment, but the gap in the last two decades has been narrowing. Countries in the region should not be complacent and should transform their economies by supporting more (genuine) private sector development. The success of the economic and social transformation agenda led by Saudi Arabia is vital for the region. Yet the ultimate test of that transformation is whether it would be sustained and financed through (domestic and foreign) private investment instead of state funds, which will eventually run out.

Education is the best performing indicator for the region, with a score that has doubled in the period of analysis. Nonetheless, there is still room for improvement, as the level is still low (close to 45 points), relative to the global average. Educated but unemployed youth have been the drivers of the Arab Spring. That situation is a source of worry for leaders who want to keep the status quo, and has led them to place limits on political freedom and civil liberties.

The region scores significantly below the global average in inequality and minority rights, and the gaps have not been reduced in the last twenty-five years. Persistently high inequality is a source of further tensions. The need to promote equality of opportunity in the region—through free enterprise and curbing cronyism—has never been greater. Failure to address deficiencies in economic but also political freedom will hamper prosperity in the region and lead to further instability.

The future ahead

Over the next decade, countries in the MENA region will have to grapple with economic and political transitions in a world in mutation. To achieve freedom and prosperity, countries in the region will have to face up to risks linked to geopolitics, climate change, and the transformation of energy markets, as well as social polarization.

The region is at a tipping point when it comes to conflict escalation. Indeed, the alarming intensity and casualties resulting from the conflict between Israel and the Palestinian territories risk engulfing the whole region. This new phase of escalation of violence brings not only tragic loss of lives but also physical destruction, fear, and uncertainty. That new spread of violence will have far-reaching economic and social consequences. What is more, the Palestinian issue is an important fault line between the Global North and the Global South that could have global repercussions and tear the region further apart.

The region is also extremely exposed to the existential threat posed by climate change. Climate change is simply making the Middle East and North Africa unlivable at a faster rate than any other region. Specifically, temperatures have reached record highs and a water crisis is looming in the region, which could lead to heightened domestic tensions and interstate conflicts. The crisis is made worse by the inadequate governance of the water sector and other utilities, which has exacerbated the frustration of the citizenry over poor public services.

The region also needs to transition away from fossil fuels. Oil prices have been persistently high and this has provided some respite to the many oil-exporting countries in the region. Yet, as the world moves away from fossil fuels, the vast reserves of oil and natural gas with which MENA is endowed will eventually become stranded—and so will the capital investment in the sector. With these considerations in mind, several MENA countries have embarked on ambitious diversification programs to move away from oil, although success has, so far, been elusive. As we have said, Saudi Arabia’s ambitious economic and social transformation agenda could be a game changer for the region and perhaps offer a model for other countries to emulate.

A credible economic and social transformation agenda is long overdue, to meet the aspirations of an educated youth and to absorb millions of young people—females and males alike—into the labor market. The aborted political transitions have, however, polarized societies in the region: the people on the streets who continue to protest on the one side, and the political elites and crony capitalists on the other. The political and economic transitions are interlinked and failure to address both could result in further social tensions and instability.

Rabah Arezki is a former vice president at the African Development Bank, a former chief economist of the World Bank’s Middle East and North Africa region, and a former chief of commodities at the the International Monetary Fund’s Research Department. He is now a director of research at the French National Centre for Scientific Research and a senior fellow at the Foundation for Studies and Research on International Development and at Harvard Kennedy School.


Trackers and Data Visualizations

Jun 15, 2023

Freedom and Prosperity Indexes

The indexes rank 164 countries around the world according to their levels of freedom and prosperity. Use our site to explore twenty-eight years of data, compare countries and regions, and examine the sub-indexes and indicators that comprise our indexes.

Image: People gather at Jemaa al-Fna square in Marrakech, following last month’s deadly earthquake, Morocco October 15, 2023. REUTERS/Susana Vera

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