* Little sign of quick bounce after political changes
* External capital flows affected by instability
* Gulf producers to spend domestically from high oil
revenues
AMMAN, Feb 8 (Reuters) - Political turmoil will again
hamper economies across the Middle East and North Africa this
year and their transformation will prove much harder than in
Latin America and Asia in past decades, a senior World Bank
official said on Wednesday.
Managing Director Sri Mulyani Indrawati said investors were
holding off from committing to countries like Tunisia, Egypt and
Libya, which are still recovering from violent overthrows of
authoritarian leaders.
She said a weak global economy meant the region would face a
more "complicated and challenging" transition period than other
developing economies that benefitted from more bullish external
conditions in the 1970s, 80s and 90s.
"In episodes before like in Latin America and Asia the
global economy was relatively healthy," she told Reuters in an
interview.
"In the situation the Arab world is going through it is
going to be much harder (to revive higher growth) because the
environment of the global and regional (economy) is also weak
... creating additional risk in external demand, exports, weaker
remittances and foreign direct investment."
In a report last month sharply cutting its world economic
growth expectations, the World Bank said political tensions in
the Middle East and North Africa could disrupt oil supplies and
add another blow to global prospects.
The World Bank estimated that the GDP for Middle East and
North Africa had increased 1.7 percent in 2011, down from 3.6
percent in 2010 with growth likely to remain subdued this year
at about 2.3 percent.
The World Bank's report also said the political turmoil had
"seriously and selectively disrupted growth in the region" with
two sets of tensions that could surface if the unrest
intensifies this and the European debt crisis pushes the
region's import commodities bill higher, and hurts tourism
receipts and exports.
"This year is not going to be much better than 2011 and
there will be more possible muddle through," Indrawati said.
SPILL OVER
Unrest in Syria, a major economy, was an example of the
downside risk that could spill over beyond its borders to its
neighbours, Iraq, Lebanon and Jordan.
Higher food and fuel prices in a region where countries such
as Jordan, Morocco and Egypt import grains and subsidise the
poor would also add to pressures on economies suffering from
lower tourism and remittances revenues, Indrawati said.
The region includes Gulf Arab states whose oil and gas
reserves and small populations, make them some of the wealthiest
countries in the world.
"In the Gulf they will try to minimise (the impact) by
investing a lot in domestic spending using the oil money,"
Indrawati, said.
World Bank figures showed hydrocarbon revenues for the
region totalled $785 billion last year, bolstered by high oil
prices.
The mounting challenges that face the region come mostly
from domestic pressures of less fiscal space and the need at the
same time to spend to ease social tensions. Depleted foreign
reserves would not help progress towards political stability,
Indrawati said.
"When it is (a) transition into democracy like Tunisia then
you have more the possibility in which people can see the
process and they are participating in the process of change but
don't have any illusion that this will even be easy," Indrawati
said.
"In each country it's different. In Tunisia, it achieved
more or less certainty in elections but in other countries it is
still a long way to go in the political transition," she said.
"Both the domestic and private sector as well as foreign
direct investments, they are all waiting for what is going to be
the new governments or governments in transition and what they
are going to come up with," Indrawati said.
Indrawati said Arab decisionmakers must also draw lessons
from a boom period that saw high growth in the last decade but
failed its educated youths, the majority of the region's
population, "who did not feel the benefit of that growth."
"The growth model, the economic design must be reviewed in
order to be more inclusive so that every percentage of growth
will create more jobs rather than reduce jobs," she added.
Otherwise this did not only "create inequality but is not
socially economically and politically sustainable."
Governments had to address lack of jobs, unequal treatment,
and demands for dignity that had triggered the 2011 Arab spring,
said Indrawati.
"Don't forget in Tunisia it is not that Bouazizi did not
want to work he wanted to work but he was harassed by the law
enforcer," said Indrawati, referring to the unemployed 26-year
old Tunisian turned street trader who set himself on fire in an
act of protest which inspired the Arab Spring.
"People want to really work and want dignity and jobs and
have a fair chance so that they can produce and be involved in
productive activity."
(Editing by Patrick Graham)
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