The Middle East and North Africa (MENA) region has been going through a period of transition, both on the political and economic fronts. The Arab Spring has led most countries in the MENA region to witness political restructuring, with new leadership in power, many of which were dominated by Islamist parties. Even though several positive developments took place in 2012 in most countries, many are still politically instable. Political instability disrupted economic activity and growth prospects in these economies. Moreover, all MENA economies continue to be affected by the sluggish global economic conditions. As a result, lower growth rates were recorded across the region, due to lower oil production for oil exporters, and budgetary and external balance pressures for oil-importing economies.
Most MENA economies have gone through a wave of structural reforms in 2012, which are to be continued in 2013 and over the next couple of years. Oil exporting countries have been diversifying their economies away from oil revenues, and increasing public expenditure. Government spending has also increased in other MENA countries, adding to already existing fiscal pressures, as spending on subsidies and wages increased in “Arab Spring countries”. Narrowing the budget deficit, improving the balance of payments, and lowering unemployment were the focus of monetary and fiscal reforms undertaken by countries in the region. However, for any of the reforms to be effective in supporting economic growth, a stable political environment should be realized first.