Arab Spring turns to economic winter

The world’s highest youth jobless rate left the Middle East vulnerable to the uprisings that ousted Egypt’s Hosni Mubarak and three other leaders in the past year. It has got worse since then. About 1 million Egyptians lost their jobs in 2011 as the economy shrank for the first time in decades. Unemployment in Tunisia, where the revolts began, climbed above 18 percent, the central bank said in January. It was 13 percent in 2010, International Monetary Fund data show.

Finding work for people like Mohammad will be the biggest challenge for newly elected governments, highlighting the rift between soaring expectations unleashed by the revolts and the reality of economies struggling to escape recession. Failure risks another wave of unrest in a region that holds more than half the world’s oil.

“The advent of democracy brought with it high, high hopes,” said Raza Agha, London-based senior economist at the Royal Bank of Scotland Group Plc. “Expectations are that new governments will bring prosperity, but when you look at the fundamentals, this does not appear to be the case.”

Tunisia’s gross domestic product shrank 1.8 percent last year, and the government this month lowered its growth forecast for 2012 by one percentage point to 3.5 percent. Tunisia’s economy hasn’t contracted since 1986, according to IMF data.

Egypt’s economy shrank 0.8 percent in 2011. The government pays almost 16 percent for one-year borrowing in pounds, up from less than 11 percent at the end of 2010, after four ratings cuts by Moody’s Investors Service effectively shut the country out of international debt markets. While the benchmark stock index has rebounded this year, it’s still almost a third below pre-revolt levels. The EGX 30 Index declined 6.6 percent this month…

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