Inflation and unemployment as a result of the demographic explosion – the new Arab Spring is in the making
Every now and then we receive information about the outbreak of social protests in the Middle East and North Africa. January: strikes were staged in Tunisia against the rise in prices for basic products.1) February: riots broke out in Jordan against the rise in food prices.2) July: mass protests in Iraq caused by unemployment.3) Egypt has not yet followed suit, but it is just a matter of time before the unhappy population takes to Tahrir Square again.
These events are said to have been caused by social dissatisfaction with the rise in prices of elementary goods and high unemployment rates, but the root of the problem is deeper.
Countries such as Morocco, Algeria, Tunisia, Libya, Egypt, Jordan and Iraq have a relatively high fertility rate, which ranges from 2.2 in Tunisia to 4.4 in Iraq (see map below). In the last 20 years, the population has increased by 25% there. The governments of these countries are not able to control the demographic explosion, and thus ensure a sufficient standard of living for citizens.
Since the beginning of this year, protests caused by rising prices and unemployment have erupted in Tunisia, Jordan and Iraq. A similar situation related to inflation, unemployment and rapid natural increase is occurring in Egypt, Algeria, Libya and Morocco. We also expect mass strikes in the coming months to occur in these countries.
The Gefira team has analyzed inflation, fertility rates and the unemployment rate and reached the following conclusions:
(i) High fertility rates translate into greater demand for basic goods. Since supply is lagging behind, prices rise.
(ii) Due to the persisting demographic boom, people under 25 constitute on average half of the society. Even if the unemployment rates remain at similar levels as in previous years, the absolute number of the unemployed is larger and larger (eg. in Iraq, although the unemployment rate declined from 15.2% in 2010 to 14.8% in 2017, it translated into 2.5 million and 3.2 million unemployed respectively, thus an increase in absolute numbers).
(iii) the low level of GDP per capita with a rapidly growing population lowers the standard of living. The economy is not keeping up with the creation of jobs nor with the training of qualified staff.
We expect that in the coming months social dissatisfaction will escalate further and transform into protests involving the countries of the Middle East and North Africa. The result of these events will be (i) the overthrow of governments, which in turn will (ii) boost the emigration of citizens of these countries to Europe, and (iii) increase oil prices (Iraq is the third world exporter of oil). We assume that the scale of the riots will be greater than during the Arab Spring.
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|1.||↑||‘You Can’t Survive Anymore’: Tunisia Protests Rising Prices and Taxes, The New York Times, 2018-01-09.|
|2.||↑||Riots break out in Jordan over bread price hikes, The New Arab 2018-02-05.|
|3.||↑||Iraq Says Oil Safe as Government Cuts Social Media Amid Protests, Bloomberg, 2018-07-15.|