Political stability is key to economic activity nowadays, especially in a global economy context where everybody depends on everybody and where the media conveys and amplifies the turmoil taking place in the world.
The political events shaking up the Maghreb and Middle East will have a negative impact on their economies, causing a reflux of foreign capital flows, the flight of tourists to other destinations, a decline in exports, a drop in currency parity, etc..
In short, all the needed ingredients for an economic crisis are already combined. Moreover, there is a rampant inflation due to the soaring prices of foods and some commodities.
All this makes rating agencies give lower scores to the two economies in question. Yet, the countries of the region survived the global financial and economic crisis without much harm.
To tell the truth, the Maghreb and Middle East regions might suffer from this situation in the short term, but things will get back to normal in the medium and long runs.
In fact, the political movements in Tunisia and Egypt do not question their respective economic models, did not show any hostility toward foreigners, and still advocate the free market economy and openness to the global market.
Those movements are neither about nationalisation nor indictment of globalization and openness to the global economy.
The political forces that are at the forefront of these claims are fully aware that their economic growth and prosperity depend on this openness, and the entailing flows of capital, tourists, and know-how.
Therefore, there is no danger for investors, because those forces are only aspiring to establish what the developed countries have already achieved.
They are claiming clear rules of play, good governance, genuine transparency and fighting corruption, patronage, and nepotism. In other words, the claims are about everything that can reassure foreign investors and encourage them to target these countries.
If these changes materialize, they will lead to more modern institutions, more rational practices and a more transparent economic system that can better meet the requirements of the global market.
It’s needless to say that all this depends on the current transition and the political forces that will emerge out of it.
The other countries that are not yet affected by the contagion should understand that no one is immune from it.
It is time for them to boost existing reforms and take genuine actions to get in tune with modern economies and avoid the pitfalls that may sweep them away.
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