`Euromoney Interviews Marco Vicenzino 

“The longer the war continues, the greater the political and economic deterioration resulting in increased social unrest, and its accompanying adverse effects.”

 – Marco Vicenzino, Euromoney Country Risk Expert 

June 6th, 2022

Several of the region’s economies are exposed to inflation, economic slowdown and political risks.

The year began on a sour note for North African investors as many of the region’s popular investor domains were downgraded by economists and other risk experts taking part in Euromoney’s crowd-sourcing survey.

Risk scores for Egypt, Libya, Morocco and Tunisia deteriorated, with only oil-producing Algeria bucking the trend.

Marco Vicenzino, director of the Global Strategy Project (GSP), notes that the fallout from Russia’s invasion of Ukraine is having a devastating global impact, particularly for those Middle East and North Africa (MENA) states that are most dependent on Russian and Ukrainian energy and food supplies.

“The longer the war continues, the greater the political and economic deterioration resulting in increased social unrest, and its accompanying adverse effects,” he says. “Existing high youth unemployment further exacerbates the declining status quo.”

Vicenzino believes these factors threaten domestic stability and present geopolitical risks for the broader region and beyond.

“Just as these countries were struggling to establish fiscal order post-Covid, the Ukraine war has further derailed them exponentially with staggering debt distress,” he says.

Vicenzino goes on to warn, alarmingly, that in some places the risks of severe malnutrition and famine are a worst-case scenario, particularly as some food-exporting nations begin to impose export restrictions to protect their domestic supply.

“In order to provide a softer landing, these governments have no other option but to subsidize basic food and energy costs upon which their masses survive daily,” he says. “As the situation worsens, governments will have to increase direct subsidies to reduce the risks of impending unrest that food shortages can unleash.”

Furthermore, he says deteriorating conditions in the region could trigger a reinvigorated migration crisis on Europe’s southern shores, in addition to the current crisis on its eastern frontiers with Ukraine.

On Tunisia, Vicenzino agrees that economic uncertainty and continuing political instability remain the reality.

He notes the Tunisia’s political opposition remains highly fragmented – particularly along secular-Islamist fault-lines – and it does not present a viable or coherent alternative.

In theory, he says, the ideal outcome is for all parties in Tunisia to make the necessary compromises to reach a broad-based national consensus resulting in a new constitution.

“However, in practice, bridging the gaps remains an enormous undertaking,” says Vicenzino. “Even if a political compromise is achieved on paper, carrying it out will remain an enormous task. Furthermore, it would require effective management skills and a minimum level of trust, which are both seriously lacking.”