Macroeconomic scenarios for the south Mediterranean countries: Evidence from general equilibrium model simulation results

The “Arab spring” aftermath calls for a closer look at the developments in the south Mediterranean countries. This paper develops and assesses alternative scenarios for the region up to the year 2030 with the employment of GEM-E3, a computable general equilibrium model. The scenarios quantify three alternative visions of the regional future which assume: (i) south Mediterranean-EU cooperation, (ii) south Mediterranean global opening and (iii) escalation of regional conflicts and failure to cooperate. The scenarios are compared to the baseline scenario, which assumes a continuation of the regional policies observed in the recent past. Assumptions on trade integration, infrastructure, population and governance developments are adopted in each scenario. Infrastructure upgrades and governance improvements within an EU cooperation context are found to benefit the region most. The findings have important policy implications indicating alternatives to be implemented.