Resource Dependence, Integration, and Diversification in MENA

In spite of improved performance during the last decade, the MENA region has had a disappointing performance compared to other middle income countries. The paper surveys underlying causes by constructing micro and macro indicators and comparing performance with other countries. Lower growth and higher volatility (growth and real effective exchange rates) are typical of the Region (even when comparisons are restricted to other oil exporters). A sustained real exchange undervaluation found to be critical for most sustained growth episodes was largely absent in the countries in the region over the last thirty years. Compared with other middle-income countries, the manufacturing sector is under-sized, especially in resource-rich labor abundant countries. In spite of recent progress, microeconomic reforms are still to be completed, particularly in the area of regulatory policies and backbone services and trade policy barriers are still higher than elsewhere.