International rating agency Fitch Ratings has stated that although the end of the war in Iraq has improved regional stability, ongoing geopolitical tensions combined with structural economic weaknesses effectively constrain the economic and credit outlook for the Middle East.
In its recently published special report on the region, titled ‘The Middle East Outlook Post-Iraq’, Fitch said while the end of the war in Iraq removes the uncertainties associated with a pending conflict, the war on terrorism continues, as does the strategy to combat weapons of mass destruction, both of which focus on countries in the Middle East, among others.
Moreover, the ongoing Israeli-Palestinian conflict has wider regional implications and draws in members of the broader international community. According to Fitch, there are, in addition, a number of domestic factors that could contribute to social and political instability in the medium term if insufficiently addressed.
Serious demographic and employment pressures, weak political rights and civil liberties, and low levels of human development relative to income are evident across the Middle East. Structural economic weaknesses, some of which are related to political and security concerns, are also widespread.
Fitch pointed out that the Middle East is behind most other developing regions in terms of international economic integration. With few exceptions, foreign direct investment is exceptionally low, intra-regional trade flows are limited and non-oil exports are underdeveloped.
The Middle East's share of global trade has declined markedly since 1980, suggesting that the gains from trade in terms of efficiency improvements, welfare enhancements and medium-term growth stimuli are less evident than in any other developing region except Sub-Saharan Africa.
Given the ongoing political and security risks as well as the structural economic challenges, Fitch believes it is essential that policy makers across the Middle East take advantage of what positive momentum the end of the war in Iraq has generated.
The "roadmap to peace" initiative, the lifting of UN-imposed sanctions against Iraq after 13 years and the US intention to negotiate a free trade agreement with the region over the next decade are recent developments that could have significant positive implications for the region. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
