World Bank: Economic Digitalization in Middle East Can Generate $1.6 Trillion in Gains

The World Bank said that the adoption of digital technologies in MENA countries would achieve enormous social and economic gains. (Photo: Reuters)
The World Bank said that the adoption of digital technologies in MENA countries would achieve enormous social and economic gains. (Photo: Reuters)
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World Bank: Economic Digitalization in Middle East Can Generate $1.6 Trillion in Gains

The World Bank said that the adoption of digital technologies in MENA countries would achieve enormous social and economic gains. (Photo: Reuters)
The World Bank said that the adoption of digital technologies in MENA countries would achieve enormous social and economic gains. (Photo: Reuters)

The World Bank said the full digitization of the economy in the Middle East and North Africa could raise GDP per capita by at least 46 percent over 30 years, or long-term gains of $1.6 trillion.

In a new report entitled, “The Upside of Digital for the Middle East and North Africa, How Digital Technology Adoption Can Accelerate Growth and Create Jobs,” the World Bank said that during the first year of digitization, the region’s GDP per capita could reach $300 billion.

According to the report, this increase will be more pronounced in lower-income countries in the region, which will witness a minimum of 71 percent increase as the gains are driven by closing the gap in access to digital technologies.

The World Bank added that the adoption of digital technologies in MENA countries would achieve enormous social and economic benefits amounting to hundreds of billions of dollars annually, emphasizing that extensive use of digital services, such as mobile services and digital payments, would boost economic growth.

Ferid Belhaj, World Bank Vice President for the Middle East and North Africa, said: “The gains from increasing the transformation to a digital economy are enormous, and governments should do everything they can to remove the obstacles to this transformation.”

He added: “The sooner and faster this push, the greater the gains...Digital transformation would provide job opportunities in a region where unemployment rates are unacceptably high, especially among young people and women. With coordinated efforts, this situation can change.”

The World Bank report said that the Middle East and North Africa region suffered from a “digital paradox”: the region’s population uses social media more than expected for its level of gross domestic product (GDP) per capita but uses the internet or other digital tools to make payments less than expected.

For example, digital payments in the MENA region’s developing countries (i.e. countries that are not members of the Gulf Cooperation Council) account for 32 percent of total transactions, compared to 43 percent in Latin America and the Caribbean.

Moreover, the report presented evidence that the socioeconomic gains of digitalizing the economies of the region were huge: “GDP per capita could rise by more than 40 percent; manufacturing revenue per unit of factors of production could increase by 37 percent; employment in manufacturing could rise by 7 percent; tourist arrivals could rise by 70 percent, creating jobs in the hospitality sector; long-term unemployment rates could fall to negligible levels; and female labor force participation could double to more than 40 percent.”

The bank underlined the necessity to adopt measures to strengthen the regulatory framework of e-commerce transactions, including electronic signatures, data privacy protection and cyber security.

“Targeting underserved populations and areas can accelerate the achievement of universal access, while fostering competition and improving the functioning of financial and telecommunications sectors can encourage the adoption of digital technologies,” according to the report’s summary.



Expert: Türkiye Anti-inflation Steps Don’t Go Far Enough

People shop at a bazaar in Istanbul. Reuters
People shop at a bazaar in Istanbul. Reuters
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Expert: Türkiye Anti-inflation Steps Don’t Go Far Enough

People shop at a bazaar in Istanbul. Reuters
People shop at a bazaar in Istanbul. Reuters

Although Turkish inflation slowed in September, it is still raging out of control with the government avoiding difficult decisions that could help tackle it, experts told AFP.

Türkiye has experienced spiraling inflation the past two years, peaking at an annual rate of 85.5 percent in October 2022 and 75.45 percent in May.

The government claims it slowed to 49.4 percent in September.

But the figures are disputed by the ENAG group of independent economists who estimate that year-on-year inflation stood at 88.6 percent in September.

Finance Minister Mehmet Simsek has said Ankara was hoping to bring inflation down to 17.6 percent by the end of 2025 and to “single digits” by 2026.

And President Recep Tayyip Erdogan recently hailed Türkiye’s success in “starting the process of permanent disinflation.”

“The hard times are behind us,” he said.

But economists interviewed by AFP said the surge in consumer prices in Türkiye had become “chronic” and is being exacerbated by some government policies.

“The current drop is simply due to a base effect. The price rises over the course of a month is still high, at 2.97 percent across Türkiye and 3.9 percent in Istanbul.

“You can’t call this a success story,” said Mehmet Sisman, economics professor at Istanbul’s Marmara University.

Spurning conventional economic practice of raising interest rates to curb inflation, Erdogan has long defended a policy of lowering rates. That has sent the lira sliding, further fueling inflation.

But after his reelection in May 2023, he gave Türkiye’s Central Bank free rein to raise its main interest rate from 8.5 to 50 percent between June 2023 and March 2024.

The central bank’s rate remained unchanged in September for the sixth consecutive month.

“The fight against inflation revolves around the priorities of the financial sector. As a result, it is done indirectly and generates uncertainty,” explained Erinc Yeldan, economics professor at Kadir Has University in Istanbul.

But raising interest rates alone is not enough to steady inflation without addressing massive budget deficits, according to Yakup Kucukkale, an economics professor at Karadeniz Technical University.

He pointed to Türkiye’s record budget deficit of 129.6 billion lira (3.45 billion euros).

“Simsek says this is due to expenditure linked to the reconstruction in regions hit by the February 2023 earthquake,” he said of the disaster that killed more than 53,000 people.

“But the real black hole is due to the costly public-private partnership contracts,” he said, referring to infrastructure contracts which critics say are often awarded to firms close to Erdogan’s government.

Such contracts cover construction and management of everything from motorways and bridges to hospitals and airports, and are often accompanied by generous guarantees such as state compensation in the event they are underused.

“We should question these contracts, which are a burden on the budget because this compensation is indexed to the dollar or the euro,” said Kucukkale.

Anti-inflation measures also tend to impact low-income households at a time when the minimum wage hasn’t been raised since January, he said.

“But these people already have little purchasing power. To lower demand, such measures must target higher-income groups, but there is hardly anything affecting them,” he said.