This study aims to assess the contribution of productivity to economic growth in Arab economies and to identify the key factors influencing this contribution. The findings reveal that, despite the relative advantage Arab countries enjoyed in terms of capital accumulation and labor availability during the period 2000–2023, they were not able to utilize these inputs efficiently.
The negative contribution of total factor productivity led to slower growth rates compared with other regions of the world, particularly in the aftermath of the COVID-19 pandemic. Based on the results of a panel time-series analysis covering approximately 154 countries, using an econometric model that incorporates indicators of development, economic progress, macroeconomic conditions, and economic policy variables, the study shows that improvements in the Human Development Index across Arab countries, together with adherence to disciplined monetary policies, had a positive impact on productivity, helping to mitigate the adverse effects of rising inflation rates.
By contrast, the rapid increase in government spending and public debt ratios had a disproportionately negative impact on productivity compared with global trends, further slowing economic growth in the region. The results underscore the need for Arab economies to adopt policies aimed at achieving macroeconomic stability, with a particular focus on fiscal discipline and sound public debt management.
The study also identifies clearer policy frameworks for enhancing productivity, emphasizing that the most effective contribution fiscal and monetary policies can make to improving economic productivity lies primarily in strengthening economic stability. This can be achieved through policy orientations that are responsive to prevailing economic conditions while safeguarding the sustainability of fiscal and monetary policies.
