meed-logo

line1 line2 line3
SIGN IN / REGISTER

Mena economies living dangerously

27 December 2023

 

Gaza conflict puts the region on edge once again

Middle East and North Africa (Mena) economies enter 2024 in a state of flux. While most are well placed to continue their post-pandemic growth trajectory, albeit in the context of weaker oil sector growth, some states – Egypt and Tunisia notable among them — are under pressure to undertake painful reforms in order to elicit IMF funding packages.

Overall, hopes are high that growth in the Mena region will at least outpace the sluggish performance of the past year.  Policymakers across the region will also be looking to double down on the private sector dynamism that saw non-oil growth outpace hydrocarbons performances in 2023.

The overall rear-view mirror is not especially encouraging. The IMF’s Regional Economic Outlook has Mena real GDP slowing to 2 per cent in 2023 from 5.6 per cent in 2022, a decline attributed to the impact of lower oil production among exporters and tighter monetary policy conditions in the region’s emerging market and middle-income economies. Geopolitical tensions – not least the Gaza conflict – and natural disasters in Morocco and Libya have also weighed on regional economies. 

GDP growth

The World Bank estimates that in per capita terms, GDP growth across the region decreased from 4.3 per cent in 2022 to just 0.4 per cent in 2023. By the end of 2023, it says, only eight of 15 Mena economies will have returned to pre-pandemic real GDP per capita levels.

Much hinges on developments in the oil market. The Opec+ decision on 30 November to agree voluntary output reductions that will extend Saudi and Russian cuts of 1.3 million barrels a day (b/d), is designed to shore up prices, but it will come at a cost. 

Saudi Arabia’s GDP data for the third quarter of 2023 revealed the full impact of output restraint, as the economy contracted at its fastest rate since the pandemic. Saudi GDP notably declined by 3.9 per cent in the third quarter compared to the previous quarter – after the kingdom implemented an additional voluntary 1 million b/d oil output cut.

As a whole, GCC economic growth has been tepid, despite a resurgence in services hotspots such as the UAE, where retail and hospitality sectors have boomed. The World Bank’s Gulf Economic Update report, published in late November, sees GCC growth at just 1 per cent in 2023, although this is expected to rise to 3.6 per cent in 2024. 

Oil sector activity is expected to contract by 3.9 per cent in 2024 as a result of the recurrent Opec+ production cuts and global economic slowdown, according to Capital Economics. However, weaker oil sector activity will be compensated for by non-oil sectors, where growth is projected at a relatively healthy 3.9 per cent in 2024, supported by sustained private consumption, strategic fixed investments and accommodative fiscal policy.

“There has not been much GDP growth this year, but the non-oil economy has been surprisingly robust and resilient, despite the fact that the liquidity has not been as much of a driver as it was a year earlier,” says Jarmo Kotilaine, a regional economic expert. 

“Of course, the cost of capital has gone up and there have been some liquidity constraints. But we do have a lot of momentum in the non-oil economy.” 

In Saudi Arabia, beyond its robust real estate story, the ventures implemented under the national investment strategy are unfolding and semi-sovereign funds are playing a key role in ensuring continuity. “You are seeing more of these green energy projects across the region. It really has been a surprisingly positive story for the non-oil economy,” says Kotilaine.

Government spending

Fiscal policy will remain loose, at least among Mena oil exporters, whose revenues endow them with greater fiscal fire-power. 

Saudi Arabia’s 2024 pre-budget statement bakes in further budget deficits, with government spending for 2023 and 2024 expected to be 34 per cent and 32 per cent higher, respectively, than the finance ministry had projected in the 2022 budget.  This is not just higher spending on health, education and social welfare, but also marked increases in capital expenditure, including on the kingdom’s gigapojects. 

That luxury is not open to the likes of Bahrain and Oman, the former recording the highest public debt-to-GDP ratio in the region at 125 per cent in 2023. Those two Gulf states will need to maintain a closer watch on their fiscal positions in 2024. 

There are broader changes to fiscal policy taking place in the Gulf states, notes Kotilaine, some of which will be registered in 2024. “There are areas that the government will play a role in, but in a much more selective and focused manner. Much less of the overall story now hinges on government spending than it used to in the GCC,” he says.

For 2024, a consensus is emerging that the Mena region should see GDP growth of above 3 per cent. That is better than 2023, but well below the previous year and, warns the IMF, insufficient to be strong or inclusive enough to create jobs for the 100 million Arab youth who will reach working age in the next 10 years. 

The Mena region’s non-oil buoyancy at least offers hope that diversification will deliver more benefits to regional populations, reflecting the impact of structural reforms designed to improve the investment environment and make labour markets more flexible. 

“The labour market in the region continues to strengthen, with business confidence and hiring activity reverting to pre-pandemic levels,” says Safaa el-Tayeb el-Kogali, World Bank country director for the GCC. “In Saudi Arabia, private sector workforce has grown steadily, reaching 2.6 million in early 2023. This expansion coincides with overall increases in labour force participation, employment-to-population ratio, and a decrease in unemployment.”

El-Kogali adds that non-oil exports across the GCC region continue to lag, however. “While the substantial improvement in the external balances of the GCC over the past years is attributed to the exports of the oil sector, few countries in the region have also shown progress in non-oil merchandise exports. This requires close attention by policymakers to further diversify their exports portfolio by further promoting private sector development and competitiveness.”

Regional trade

There is a broader reshaping of the Gulf’s international trading and political relations, shifting away from close ties with the West to a broader alignment that includes Asian economies. The entry of Saudi Arabia, the UAE and Iran to the Brics group of emerging market nations, taking effect in 2024, is a sign of this process.

The decision of the Saudi central bank and People’s Bank of China in November 2023 to agree a local-currency swap deal worth about $7bn underscores the kingdom’s reduced reliance on the Western financial system and a greater openness to facilitating more Chinese investment.

“You want to be as multi-directional, as multi-modal as you can,” says Kotilaine. “For the Gulf states, it is almost like they are trying to transcend the old bloc politics. It is not about who your best friend is. They want to think of this in terms of a non-zero sum game, and that worked very well for them during the global financial crisis when they had to pivot from the West to the East.”

Near-term challenges

While long-term strategic repositioning will influence Mena economic policy-making in 2024, there will be near-term issues to grapple with. High up that list is the Gaza conflict, the wider regional impacts of which are still unknown. 

Most current baseline forecasts do not envisage a wider regional escalation, limiting the conflict’s impacts on regional economies. The initial spike in oil prices following the 7 October attacks dissipated fairly quickly. 

Egypt is the most exposed to a worsening of the situation in Gaza, sharing a land border with the territory. However, the Gaza crisis is not the only challenge facing the North African country 

Elections set for 10 December will grant President Abdelfattah al-Sisi another term in office, but his in-tray is bulging under a host of economic pressures. 

Inflation peaked at 41 per cent in June 2023. A currency devaluation is being urged, as a more flexible pound would offer a better chance of attracting much-needed capital inflows. 

The corollary is that it would have to be accompanied by an interest rate hike. Capital Economics sees a 200 basis point increase to 21.25 per cent as the most likely outcome, ratcheting up the pain on Egyptian businesses and households. 

A deal with the IMF would do much to settle Egyptian nerves, with a rescue plan worth $5bn understood to be in the offing. But Egypt has to do more to convince the fund that it is prepared to undertake meaningful fiscal reforms.  Privatisations of state assets, including Egypt Aluminum, will help.  

Other Mena economies will enjoy more leeway to chart their own economic path in 2024. Iraq has achieved greater political stability over the past year, and may stand a better chance of reforming its economy, although weaker oil prices will limit the heavily hydrocarbons-dominated economy’s room for manoeuvre. 

Jordan is another Mena economy that has managed to tame inflation. Like Egypt, however, the country is also heavily exposed to what happens in Gaza. 

Few could have predicted the bloody events that followed the 7 October attacks. Mena region economic strategists will be hoping that 2024 will not bring further surprises.

Can the Gulf build back better?

The GCC has done much to put itself on the global map through effective reputation building. But, notes regional economic expert Jarmo Kotilaine, the focus of policy will now have to change from building more to building better, making the existing infrastructure and systems operate with greater efficiency. 

Above all, the region will need dynamic and adaptable companies and an economically engaged workforce. 

“The reality is the GCC has a lot of capital committed to the old economy. There is the question of how much of that should be upgraded, or made to work better, because fundamentally, one of the region’s big challenges is that local economies have very low levels of productivity.”   

It is by upgrading what the GCC has, by incorporating technology and energy efficiency, that the region can make productivity growth a driver, he tells MEED.

“One area where GCC economies have started to make progress is in services: logistics, tourism, financial services. This is bringing money to the region,” he says. 

“We are also starting to see new potential export streams with things like green energy, and obviously green hydrogen.  But the Gulf states have to manufacture more, and they have to manufacture better.”

 

https://image.digitalinsightresearch.in/uploads/NewsArticle/11360413/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Joint venture tenders Algeria field development contract

    10 June 2026

     

    Hassi Bir Rekaiz Group (GHBR), which operates Algeria’s Hassi Bir Rekaiz field, has issued a tender for phase 2A of the asset’s field development project.

    GHBR is a joint venture of Algeria’s national oil and gas company Sonatrach and Thailand’s national exploration and production company PTTEP.

    The scope of the contract focuses on the “provision of engineering and supervision services”, according to documents published by Sonatrach.

    The tender has been issued with a bid deadline of 16 June 2026.

    In May, GHBR signed a $1.1bn contract for phase two of the Hassi Bir Rekaiz development project.

    The contract was won by a consortium of Egypt’s Petrojet and Italian engineering and contracting company Arkad.

    Petrojet’s portion of the project was estimated to be worth around $600m, and Arkad’s portion was estimated to be worth $500m.

    The contract used the engineering, procurement, construction and commissioning model.

    The scope of the project contract is focused on the construction of a central processing facility (CPF) capable of processing crude oil and associated gas.

    It also includes developing off-plot pipelines, as well as related utilities and infrastructure.

    The CPF will have the capacity to process 32,000 barrels a day (b/d) and will be designed to support future expansions.

    The related infrastructure will include an extensive pipeline network spanning approximately 217 kilometres, as well as a road network.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17163750/main3325.jpg
    Wil Crisp
  • Algeria extends deadline for urea-formaldehyde project

    10 June 2026

     

    Algeria’s national oil and gas company Sonatrach has extended the bid deadline for a project to develop a new concentrated urea-formaldehyde unit in its Arzew industrial zone.

    The latest bid deadline is 15 June.  

    The contract uses the engineering, procurement, construction and commissioning model, and the bid deadline for technical tender submissions was originally set for early April.

    The condensed urea-formaldehyde unit will be located at the CP1-Z facility.

    The CP1-Z facility began operations in 1975 and has a capacity of 152,000 tonnes a year. It produces products including methanol, resin and formol.

    It is a two-phase tender. The first phase is a technical bid submission, and the second phase is a commercial bid submission.

    To be eligible to win this contract, companies must specialise in petrochemical industrial installation projects.

    They also need to have a share capital of at least $7m and more than 15 years of relevant experience.

    The new unit, UFC85, will have the capacity to produce 40,000 metric tonnes of concentrated and condensed urea-formaldehyde annually.

    The project’s scope also includes the development of auxiliary equipment and installations.

    Urea-formaldehyde has a wide range of uses, including the production of laminates, textiles and paper.

    In the wood industry, it is used as a thermosetting adhesive to bond wood to create plywood and particleboard. In agriculture, urea-formaldehyde is widely used as a slow-release fertiliser.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17163657/main.jpg
    Wil Crisp
  • Sharjah developer launches Al-Mamzar towers scheme

    9 June 2026

    Local real estate developer Alef Group has launched a mixed-use development in the Al-Mamzar area of Sharjah. The Linar project is valued at AED4bn ($1.1bn) and comprises five residential towers and one commercial tower. Across the development, the 50- to 55-floor towers will offer a total of 2,620 residential units.

    With 325 metres of sea-facing frontage overlooking Al-Mamzar Beach, the development also includes retail and service spaces. Tower A, which forms part of Phase 1 of the project, is expected to be completed from 2030 onwards. 

    In a statement, the developer said that following strong demand for expressions of interest (EoIs) in Tower A, Alef Group expanded EoIs to include towers B and C. All Phase 1 EoIs have now been fully reserved, representing a total of 1,572 residential units with a combined value of over AED2bn. The group is preparing to open EoIs for towers D and E.

    In April, Alef Group awarded Abu Dhabi-based construction firm A&M International a AED750m contract to build the next phases of its Hayyan residential community in Sharjah. The scope includes the construction of more than 700 villas and townhouses across three clusters – Samr 1, Samr 2 and Deem – along with Hayyan Mall, a clubhouse and associated infrastructure works.

    The Hayyan masterplan includes seven residential clusters: Alma, Arim 1, Arim 2, Arim 3, Samr 1, Samr 2 and Samr 3.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17157150/main1720.jpg
    Colin Foreman
  • Record investment drives Jordan’s utilities market

    9 June 2026

     

    In April, Jordan signed the final technical and legal agreement for its landmark National Water Carrier Project, paving the way for the financial close of the kingdom’s largest planned water infrastructure project to date.

    The agreement represents a significant step forward for the scheme, which is now projected to reach $5.6bn in total costs, including financing, up from earlier estimates of $3.5bn.

    Paris-based investment and utility firms Meridiam and Suez were awarded the contract last year to develop the project in partnership with Jordan’s Water & Irrigation Ministry.

    Since then, multiple large-scale financing agreements have been put in place for the project, which is expected to supply about 40% of Jordan’s drinking water needs.

    While new contract awards have been limited in 2026, the successful execution of the Aqaba-Amman Water Desalination and Conveyance scheme will help reassure the market that large-scale infrastructure projects of this nature can move forward.

    The project is set to reduce the benchmark water cost from about $3 a cubic metre in 2024 to approximately $2.7 and is crucial to addressing Jordan’s severe water scarcity.

    Prime Minister Jafar Hassan recently said that the scheme, along with the Aqaba Port railway project, represented “the largest level of foreign investment in the kingdom’s history”.

    For its part, the government has said it will contribute $722m to the Aqaba-Amman project, representing the largest single capital expenditure in the state budget.

    Upcoming projects

    Looking forward, there is a healthier pipeline of new water projects, led by a two-phased wastewater treatment project at Wadi Zarqa.

    The first phase will have an initial capacity to treat 150,000 cubic metres a day (cm/d) of wastewater by 2030.

    The $150m second phase covers an independent sewage treatment plant with a capacity of 200,000 cm/d. Both tenders are expected to be released in the coming months.

    Two larger projects, valued at $300m each, are currently in the planning stages. Both are managed by Yarmouk Water Company and involve major transmission pipeline works in Ajloun and Irbid as part of the Jordan Water Sector Efficiency Project.

    The Jordan Water Sector Efficiency Project is a World Bank-backed programme aimed at reducing water losses, improving utility performance and enhancing the efficiency of water services across the kingdom.

    Power contracts

    Jordan’s power sector is set for a record-breaking year following the announcement that a $900m combined-cycle gas turbine (CCGT) plant will be developed in partnership with Etihad Development Company, a subsidiary of the UAE’s Etihad Water & Electricity (EtihadWE).

    The project will be developed under a build-own-operate model with Jordan’s National Electric Power Company (Nepco) purchasing electricity under a 25-year power-purchase agreement.

    For context, Jordan’s power sector saw just $33m in total contract awards in 2025, according to MEED Projects.

    The full-year total last exceeded $100m in 2022, when there were $111m of contract awards. The plant is expected to meet about 10% of Jordan’s electricity demand once operational.

    The kingdom has also been looking at other forms of power generation, such as Jordan’s first 450MW pumped hydroelectric energy storage project near Al-Mujib Dam.

    Earlier this year, US-headquartered K&M Advisors and France’s Artelia were appointed as transaction advisers to carry out the final feasibility study for the project, which is expected to be tendered in the third quarter of 2026.

    The Ministry of Energy & Mineral Resources (MEMR) is also planning to undertake the construction of a 1,000MW wind power plant and battery energy storage system near the Port of Aqaba in Jordan.

    The renewable energy scheme could potentially support the kingdom’s emerging green hydrogen industry, including a separate planned $1bn green ammonia and hydrogen project in Aqaba.

    In May, the project became the first publicly announced green ammonia project in Jordan to receive development approval from the Council of Ministers.

    The project would be developed by Jordan Green Ammonia, a special-purpose vehicle funded by the UAE-based 7Fidelity Group and Poland’s Hynfra.

    The project in Aqaba is expected to produce 100,000 tonnes a year of green ammonia from 2030

    Of approximately $6bn-worth of power projects in the pre-execution phase, it is worth noting that about $4.4bn are still in the early study or feed stages.

    Near-term awards are likely to come from several smaller substation and power generation schemes.

    Jordan-Syria power link

    Among the wider pipeline of regional opportunities, Jordan’s power sector could also benefit from efforts to restore electricity connectivity with neighbouring Syria.

    Syria’s Public Establishment for Transmission & Distribution of Electricity recently tendered a contract to repair the 400kV high-voltage interconnector transmission lines between the two countries.

    The works form part of Syria’s $146m Electricity Emergency Project, which is being financed through a World Bank grant and aims to restore critical electricity infrastructure across the country.

    The rehabilitation of the Syria-Jordan interconnector is expected to enable the import of up to 600MW of electricity and represents one of several initiatives under way to rebuild Syria’s power network following years of conflict and underinvestment.

    More broadly, Syria is emerging as an active power market in its own right. In April, Germany’s Siemens Energy signed manufacturing agreements for major power plant projects being developed by a consortium led by Qatar’s UCC Holding.

    The contracts cover combined-cycle power packages for the Zayzoun and Deir Azzour power plant projects, announced last year as part of a $7bn memorandum of understanding between the consortium and Syria’s Ministry of Energy.

    The May 2025 agreements include four combined-cycle gas turbine power plants in Traifawi, Homs and Zayzoun, Deir-Azzour and Mehardeh in Hama with an installed capacity of 4GW.

    Additionally, a 1GW solar power plant will be developed in Wedian Al-Rabee in Syria’s southern region.

    Most of these projects, awarded under concession agreements following a strategic memorandum of understanding framework, are due to come online in 2029.

    After years of inactivity, this is considerable progress. The next step is attracting sufficient interest in new and upcoming tenders. This will signal whether international contractors are ready to re-engage with the country’s power sector.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17157016/main.gif
    Mark Dowdall
  • PIF-owned Ardara tenders Al-Wadi sewer package

    9 June 2026

     

    Ardara, a subsidiary of Saudi Arabia’s Public Investment Fund (PIF), has issued a tender for the trunk sewer diversion and associated works package at its Al-Wadi development in Abha in Saudi Arabia’s Asir region.

    The scope includes the construction of rainwater and flood drainage networks, roads and transport infrastructure, and associated works within the wider Al-Wadi project.

    The bid submission deadline is 15 June.

    The sewer diversion package, valued at about $20m, is part of Ardara’s wider Al-Wadi development in Abha. The company, launched by PIF in 2023, is developing the 2.5-square-kilometre Al-Wadi destination in Abha as a mixed-use tourism and lifestyle development. The project will include residential, hospitality, commercial and recreational assets. 

    As MEED understands, the sewer diversion works are expected to facilitate the development of future phases of the Al-Wadi project by relocating existing wastewater infrastructure within the site.

    The tender follows demolition works completed on the site last year.

    Previously, in 2024, US-based Parsons was appointed to provide project management and supervision services for the project.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17156098/main.jpg
    Mark Dowdall