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These countries experience disparate levels of wealth but have overall adopted rentier and/or non-diversified growth models, which do not ensure balanced economic and social development. Dependence on imports and the weakness of the private sector make these economies less resilient, particularly in the face of external shocks like this conflict. Analysis.
Countries in the region with abundant natural resources have adopted extractive and rentier models.
This is the case of Iraq, whose oil sector represents 57% of GDP in 2022 and 99% of exports, as well as 93% of public revenue over the first 4 months of 2023. In Iran, the economy is more diversified but remains dominated by oil and gas extraction, which contributes between 10% and 30% of GDP depending on the year. To a lesser extent, the hydrocarbon sector in Egypt represented 46% of exports in 2022 and benefits on average from 2/3 of foreign direct investment (FDI).
Other Middle Eastern countries have developed rentier models based on external financial flows.
Three incomes are thus found in most countries of the Levant: 1) transfers of funds from the diaspora (Egypt, Jordan, Lebanon, Syria, Palestinian Territories); 2) international aid (Egypt, Jordan, Lebanon, Syria, Palestinian Territories); and 3) tourism (Egypt, Jordan, Lebanon).
A high-income country, Israel is an exception in the region, but its economic model is actually not very diversified.
It relies on a tech ecosystem representing 18% of GDP, 11% of jobs and 51% of exports in 2022. Although previously very dynamic, the entry into war accentuates the difficulties of the tech sector, given the massive mobilization of its employees.
These rentier models make Middle Eastern countries very vulnerable to external shocks and socioeconomic crises.
They in fact lead to the macroeconomic phenomenon of “Dutch disease”, a situation where the influx of currencies penalizes the competitiveness of the productive sectors, which suffer from the appreciation of the exchange rate and the rise in wages and prices throughout the country. ‘economy.
Furthermore, rent-seeking tends to encourage clientelism and the maintenance of dysfunctional institutions. Finally, non-diversified and non-productive economic systems are extremely dependent on imports, which creates food security and balance of payments problems. The collapse of Lebanon in 2019 and the strong macroeconomic imbalances in Egypt and Iraq demonstrate the unsustainability of such models.
The current conflict is an additional test for these fragile economic models, whose sources of income (hydrocarbons, tourism) and imports are conditional on a certain regional stability.
Source French Embassy in Lebanon, economic department
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