Mediterranean Dialogue

The challenge of a U-shaped recovery

The geo-economy of the Mediterranean is composed of a disparity in the wealth of its nations and in the level of their development, with the countries on the northern shore being the most fortunate, apart from some countries bordering to the east.

Historically, crises have been a source of opportunity for a strong economic upturn. However, the post-pandemic outlook will depend on the reforms adopted during the stagnation (the basis of the U).

Many factors will condition the desired recovery, ranging from possible future covid.19 variants and the consequences for global supply chains, to inflationary pressures and the threat of an acute drought affecting the Mediterranean region in particular. All this against the background of a growing confrontation between Russia and the NATO.

In such circumstances, the International Monetary Fund (IMF) has just cautiously downgraded its forecasts across the board, including the euro zone, whose recovery is supported by substantial NextGenEU funds (€750 million). These funds will be used to restructure the economic model of some member countries and as a stimulus for others. Thus, for Spain, the IMF estimates a growth rate of 5.8%, restoring pre-pandemic levels, where tourism would flourish again.

On the other hand, and unlike the EU, the countries on the northeastern and southern shores of the Mediterranean must face the recovery with their own means, often scarce, to implement the necessary reforms to facilitate sustainable growth.

In this regard, Morocco had taken advantage of the U base to undertake major structural and technological reforms by implementing the New Development Model (NMD) that will enable it to multiply its wealth to historic levels in the short and medium term. And it is emerging as a potential prospect to take advantage of the favorable conditions for recovery based on green energies. Although the IMF and the Finance Bill (PLF) 2022 forecast growth of 3.2%, it is more likely to exceed 5% with the return of tourism which, in 2019, before the pandemic, would reach an all-time record of 13 million visitors per year.

Thus, the Kingdom of Morocco's economic outlook contrasts with that of Algeria, which remains mired in an anachronistic protectionism, unable to put in place the necessary infrastructures for its economic and social development. Algeria lives under the paradigm of a closed and unproductive economy. Its veto to the construction of the Arab Maghreb Union (AMU) only confirms its lack of economic competitiveness and its total dependence on hydrocarbons.

It is worth noting the reforms undertaken by Egypt that have led to significant economic development by increasing productive public spending. With an open economy, the country got good ratings from the main rating agencies obtained during the health crisis. In fact, growth is expected to be above 5% by 2022, according to the IMF.

Morocco and Egypt will be the most buoyant economies south of the Mediterranean arc, while the Turkish economy could falter as it suffers from high inflation (over 40%). The significant revenues from exports and, to a lesser extent, tourism, are drowning in the sea of hyperinflation because of the health crisis and aggravated by the lack of fiscal and monetary reform.

In Libya, the stabilization of the country is expected and desired based on a unity for a common future in accordance with the Skhirat Agreements. The holding of elections and the formation of a unity government would put the country on the model of the Gulf countries. The EU, Morocco and Egypt should play a decisive accompanying role in economic and social modernization, including major structural policies such as the civil service, the banking system, land policy, public and private investment and entrepreneurship.

Particularly noteworthy are three Mediterranean cases whose prospects are worrying because of their political and socio-economic instability: Algeria, Tunisia and Lebanon. These countries were hit by the health crisis during social unrest, the effects of which have led to political crises that remain unresolved.

The Mediterranean is an area where a large number of countries with a factorial composition of great structural and cultural contrasts can be found. This divergence is the key to convergence between north and south since it opens up a framework of opportunities favorable to true Mediterranean economic integration. This should lead, in an absolute Win-Win cooperation, to a perfect complementarity in different economic fields. The EU, which polarizes wealth and social welfare, must contribute to the improvement of economic prospects through credible and pragmatic projects. For this reason, Ursula von der Leyen traveled to Rabat where she confirmed the EU's interest in deepening the strategic partnership, integrating both economies, as Morocco represents a model example of development in the Mediterranean. In fact, two models stand out and whose results are confirmed by their viability: that of Morocco and that of the Gulf countries.

The high vaccination rates and the tired society that can no longer tolerate restrictions precipitate an optimism that is conducive to challenging economic recovery. In this context and barring the economic uncertainty surrounding the post-Covid-19 recovery, we could speak of positive economic prospects, albeit divergent, depending on the degree of support for the reforms implemented, without ruling out the collapse of one country or another.

U-recovery indicates a sudden decline, with a line of stagnation, with negative peaks in some economies, more or less long to return to growth again. In other words, it is not a V-recovery, which means a rapid return to growth. We have been stagnant for two years. This is a personal opinion, after superimposing some statistical curves. Many countries have taken advantage of the U base to undertake structural reforms with a view to being more resilient in the future.

Abdel-Wahed Ouarzazi

Associate Professor of Economics (Belgium), Degree in Economics and Management from the University of Grenoble (France), Former head of Human Rights Education at Amnesty International, Former member of the Migration Policies Commission representing the Provincial Delegation of Culture of Cadiz.