Government spending and economic growth in the Middle East and North Africa region

Abstract

In 2011, during the Arab Spring, citizens in some Arab countries marched in the streets, demanding decreased corruption, increased public participation in running state affairs, and provision of jobs for citizens. In response, governments in the Middle East and North Africa region initiated strategic plans to meet the people’s demands (e.g. Morocco Vision 2030, Saudi Vision 2030). One of the main parts of these plans is related to reforming the public finance sector. Recently, in response to the novel coronavirus (COVID-19) pandemic, most Middle East and North Africa countries have taken loans or withdrawn from reserves (both considered sources of funding for government expenditures) to support the economy and fund the healthcare plans to fight the disease. Thus, the efficiency and effectiveness of government spending is very important in utilizing the available resources at all times. Using data for the Middle East and North Africa region from 1990 to 2019, and utilizing a scatterplot technique and the general linear modeling procedure, this article explores the relationship between public expenditures and economic growth. The results show that the current public expenditure system is inefficient and that efficient public spending has to be combined with other factors that influence the economy (e.g. enhancing public participation in running state affairs, controlling corruption, and supporting good governance practices in the public sector). Points for practitioners Government spending is one of the most important elements in managing state affairs toward achieving advanced levels of development and providing high-quality services to beneficiaries. This research explores the relationship between government spending and economic growth; the result of this study confirms that non-financial factors, such as fighting corruption, promoting democracy and freedom, enhancing public institutions’ quality, and supporting the productivity and accountability of the public sector, are important dimensions in promoting economic growth, especially in developing countries.