IMF downgrades Mena growth forecast
1 February 2024
The Washington-based IMF has revised down the expected real GDP growth figure for the Middle East and North Africa region for 2024 to 2.9%, down from the previous projection of 3.4% in its October economic outlook.
The downgraded growth forecast reflects, among other things, the deepening of the voluntary oil production cuts as part of a further Opec+ agreement in November, as well as the heightened instability in the region as a result of the war in Gaza and the Red Sea crisis.
The most recent agreement among the Opec+ members saw half a dozen countries agree to additional voluntary production cuts through to the end of Q1 2024 – in addition to the voluntary cuts announced in April 2023 and extended until the end of 2024.
The regional oil producers that agreed to these additional cuts were Saudi Arabia, Iraq, the UAE, Kuwait, Algeria and Oman, with the six countries collectively accounting for a 1.6 million barrel a day reduction in oil output, led by Riyadh, which alone cut 1 million b/d.
In the same update, the IMF revised down Saudi Arabia’s real GDP growth forecast for 2024 to 2.7%, down from a previous projection of 4.0% in its October economic outlook.
A week ago, the fund’s concluding statement to its Article IV consultation with Oman also saw it lower the growth forecast for that country to 1.4%, down from a previous forecast of 2.7% growth.
Both revisions reflect the country-level economic impact of these additional voluntary cuts, which will have an even greater impact on the fiscal side, cutting into government revenues and possibly spending.
Geopolitical impacts
The other major influence on the regional economy in the past three months has been the eruption of the war in Gaza and the Red Sea shipping crisis.
These twin events have had considerable impact on the most adjacent geographies, with the war in Gaza affecting economies across the Levant, as well as regional tourism, and the Red Sea crisis hitting trade.
In mid-December, a study commissioned by the UN Development Programme (UNDP) estimated that the economic cost of the war in Gaza on neighbouring Egypt, Jordan and Lebanon was set to exceed $10bn in 2023 alone and had the potential to push 230,000 more people into poverty.
It noted that the conflict was impacting consumption and trade and exacerbating the existing weak growth, high unemployment and fiscal pressure in the three countries.
Egypt has been acutely affected by both the impact on tourism and the fall in receipts from the passage of ships transiting through the Suez Canal – both major sources of revenue for the Egyptian government.
On 26 January, the UN Conference on Trade and Development (UNCTAD) estimated that weekly transits through the Suez Canal had fallen by 42% over the past two months, and that container ship transits specifically had plummeted by 67% as compared to one year previously.
However, the largest impact has been on liquefied natural gas (LNG) carriers, which have stopped altogether since 16 January, according to Jan Hoffmann, trade logistics chief at UNCTAD.
Cross-sector impacts
Tourism has also been severely impacted since the commencement of hostilities in October, with the significant tourism markets of Egypt and Jordan being subject to mass flight and hotel cancellations. For Lebanon, the regional economic crisis has merely compounded the already dire domestic economy crisis.
In the IMF’s January briefing, research department division chief Daniel Leigh noted that for Egypt, “despite strong tourism performance overall in 2023, there’s been a slowdown since the start of the conflict in Gaza, in Israel, with hotel bookings clearly coming down.
“Now, on top of that, there’s the escalation and the Red Sea attacks, which may impact, and are impacting, foreign exchange inflows. That’s about $700m a month, a very important source of foreign currency for Egypt.”
Leigh said the uncertainty of the situation was already impacting investment prospects, creating an even more urgent need for additional financing to enable reforms and bring inflation down to restore growth.
The IMF is currently in discussions with Cairo over the provision of additional financing to the Egyptian government in the form of an Extended Fund Facility (EFF) from the fund alongside a reform programme.
More broadly, the IMF has assessed that the shockwaves from the war in Gaza have already caused current accounts across the region to deteriorate and given rise to $30bn in additional financing needs among Arab states outside of the Gulf, with further fallout expected if the conflict drags on.
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Gulf seizes AI opportunities30 May 2025
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Hydrogen’s future may not be so green29 May 2025
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Wood wins Iraq oil and gas contracts29 May 2025
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Related Articles
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Gulf seizes AI opportunities
30 May 2025
This package also includes: Data centres churn investments
Opportunities to build digital infrastructure – mainly data centres – to support the Gulf’s ambitious artificial intelligence (AI) initiatives jumped in value to about $80bn in mid-May, up from around $20bn at the end of April, thanks to the gigawatt-scale AI campuses announced during US President Donald Trump’s Gulf visit.
These projects provided the final piece of a puzzle relating to the massive power generation capacity buildout in Saudi Arabia and the UAE, which have been overhauling their electricity systems in line with their energy diversification, economic expansion and net-zero targets.
The planned 5GW AI campus in Abu Dhabi is expected to occupy 26 square kilometres of land when completed. Experts say that in countries with more temperate weather, such a facility would require power equivalent to the consumption of nearly three million homes.“This is as much a story about electricity as it is about AI,” Karen Young, senior research scholar at Columbia University’s Centre on Global Energy Policy, tells MEED.
She adds that the UAE leadership was “extremely prescient” to invest in nuclear power many years ago, perhaps understanding that a surplus of electricity would be key to future growth and industrial policy.
“But these things are expensive, and are easier to permit and build in the UAE because of the concentration of funding and decision-making,” she says. “It's proving a major advantage in the AI race and construction of data centres.”
Attractive asset class
Data centres are often considered part utility assets – similar to delivering gas, electricity, water and telecoms services – and part real estate assets, due to the rents they yield from tenants.
“Yet a lot of the talk … now concerns how investors look at data centres as assets,” a partner at an international law firm with an office in Riyadh says, “because they are neither utility nor real estate”.
However they are defined, the gap in digital infrastructure to support AI advancements is driving investments in data centre projects in the Middle East.
“The opportunity is ripe,” says Sherif Elkholy, partner and head of Middle East and Africa at UK-based private equity and investment firm Actis.
In addition to the sovereign wealth funds in Saudi Arabia and Abu Dhabi, family offices such as Saudi Arabia’s Vision Invest and international private equity firms are getting their feet wet in the rapidly expanding Gulf data centre market.
Actis, for example, is looking at credible local partners, with a platform or portfolio of operating as well as greenfield assets. US-based KKR acquired a stake in UAE-based Gulf Data Hub earlier this year.
“Historically, the region has been an exporter of capital, but today there is a concerted effort to attract foreign direct investments, particularly into Saudi Arabia. The strategy now is how can the region become an importer of value-added capital to support their 2030 visions?” says Elkholy.
Part of the answer lies in opening the sector to private investors and capital. According to Elkholy, the Middle East has very ambitious energy transition, digital infrastructure, desalination and district cooling projects, and the private sector is now playing a central role in delivering these.
“The mood of international investors has been to avoid risks due to global uncertainties, such as we have now, but the reality is there is a major infrastructure gap, and addressing this, especially given the 2030 targets, requires private sector participation.”
Data sovereignty
Uncertainty over data sovereignty issues across the Gulf states is yet another issue investors have had to grapple with.
Although the GCC countries have had stringent data localisation laws in place for almost a decade now, that does not seem to have dampened growing investments in data centre projects in the region, according to Nic Roudev, who leads UK-based legal firm Linklaters’ TMT practice in the Middle East.
“While data localisation requirements prevent the most efficient operational configurations, where data centres capacity is deployed in one country to service demand across the entire region, it also presents hyperscalers with opportunities to build out robust operations in each of the major GCC countries,” says Roudev.
This allows firms to take advantage of incentives for local presence, such as access to government procurement contracts and financing opportunities.
“Demonstrating commitment to the particular country’s economy by establishing and growing local operations also allows data centre investors to build durable strategic partnership relations with regulatory and government authorities, which can lead to a decrease in long-term regulatory and business uncertainty,” the executive says.
The heat and climate effects will continue to be a thorn for future Gulf data centre development and investments
Karen Young, Columbia University’s Centre on Global Energy PolicyImproving regulations
It's not all perfect, though, Young suggests, citing that the heat and climate effects will continue to be a thorn for future Gulf data centre development and investments.
“There is also the rather poor track record of exporting, trading and sharing electricity within the UAE and the GCC, and thinking about export to third countries… so that makes the idea of data centres and even data traffic via cables a little more complicated,” she explains.
From a regulatory viewpoint, Roudev says the main unique risk factors that data centre investors in the GCC typically have to wrestle with stem mostly from the usually non-transparent and frequently hard to predict legislative and regulatory rule-making and enforcement.
However, Roudev also notes that “in recent years there has been a marked trend in both the UAE and Saudi Arabia for increasing transparency by opening draft laws and regulations to public consultations and actively soliciting input from key industry stakeholders.”
A good example of this in Saudi Arabia has been the development of one of the key regulatory instruments for cloud computing services, which went through “a series of sudden and significant revisions, and the data protection law, which underwent unexpected but considerable revisions after remaining suspended for a year”.
Regulatory enforcement actions in the GCC, which have traditionally not been publicised, have also shifted, with an evident attempt in recent years to increase transparency and predictability of enforcement by authorities in both countries, concludes Roudev.
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Meraas awards Madinat Jumeirah construction deal
30 May 2025
Dubai-based real estate developer Meraas Holding, part of Dubai Holding, has awarded a AED300m ($82m) contract for the main construction works on Elara, which is Phase 7 of the Madinat Jumeirah Living masterplan in Dubai.
The contract was awarded to the local firm Al-Sahel Contracting Company.
Elara will feature three residential towers offering 234 apartments.
Construction is expected to start immediately, and the project is scheduled for completion by the end of 2026.
Earlier this month, Meeras awarded Bhatia General Contracting a contract to construct the fourth phase of the Nad Al-Sheba Gardens community in Dubai, worth AED690m ($188m).
The scope of the contract covers the construction of 92 townhouses, 96 villas and two pool houses.
In March, Meraas awarded Abu Dhabi-based Arabian Construction Company an estimated AED2bn contract ($544m) to build its Design Quarter residential project in Dubai Design District.
The development will comprise three buildings offering over 558 residential apartments. Construction is expected to be completed in 2027.
The UAE’s heightened real estate activity is in line with UK analytics firm GlobalData’s forecast that the construction industry in the country will register annual growth of 3.9% in 2025-27, supported by investments in infrastructure, renewable energy, oil and gas, housing, industrial and tourism projects.
The residential construction sector is expected to record an annual average growth rate of 2.7% in 2025-28, supported by private investments in the residential housing sector, along with government initiatives to meet rising housing demand.
MEED’s May 2025 report on the UAE includes:
> COMMENT: UAE is poised to weather the storm
> GOVERNMENT & ECONOMY: UAE looks to economic longevity
> BANKING: UAE banks dig in for new era
> UPSTREAM: Adnoc in cruise control with oil and gas targets
> DOWNSTREAM: Abu Dhabi chemicals sector sees relentless growth
> POWER: AI accelerates UAE power generation projects sector
> CONSTRUCTION: Dubai construction continues to lead region
> TRANSPORT: UAE accelerates its $60bn transport push
> DATABANK: UAE growth prospects head northhttps://image.digitalinsightresearch.in/uploads/NewsArticle/13981791/main.png -
Hydrogen’s future may not be so green
29 May 2025
Commentary
Jennifer Aguinaldo
Energy & technology editorMuch has changed in the region’s hydrogen landscape since the first projects were launched in a flurry of excitement.
Initially, in anticipation of demand for low-carbon fuel arising from Asia and Europe by the early 2030s, aspiring green hubs such as Egypt, Morocco, Abu Dhabi and Saudi Arabia announced batches of large-scale green hydrogen and ammonia projects.
Two or three of these have progressed. At Neom, the world’s largest and most ambitious green hydrogen and ammonia production plant is under construction. The $8.4bn project reached financial close in May 2023, achieved a 60% completion rate in December, and appears on track to meet the company’s 2026 target commercial operation date.
In Oman, meanwhile, where the sultanate’s third hydrogen block land auction is ongoing, developers and downstream companies are expected to submit bids sometime this year.
However, across the Middle East and North Africa region, most of the projects announced in the past few years remain in the concept or preliminary design stages, while the rest have not moved beyond signing the memorandums of understanding.
With the exception of Oman, there have been few announcements on new green hydrogen projects in the region over the past 12 months.
Shareholders have even revolted over clean hydrogen plans. Seifi Ghasemi, former CEO of Air Products, which co-owns the Neom Green Hydrogen Company, along with Saudi utility developer Acwa Power and gigaproject developer Neom, was removed from the firm’s board earlier this year, with sources citing the company shareholders’ opposition to the firm’s green hydrogen plans.
In addition to being a co-owner, Air Products is also the main offtaker, contractor and systems integrator of the Neom green hydrogen project.
Cost issue
The main issue for these projects remains the cost of production, according to Michael Liebreich, managing partner at UK firm EcoPragma Capita.
“If green ammonia is going to work anywhere, it should be [in] Oman and the GCC,” he explains. However, the London-based executive and entrepreneur has doubts about green hydrogen’s economics.
Earlier this year, his conversations with “a number of participants in green hydrogen and ammonia projects” indicate that the costs they are able to achieve today come to around $6 a kilogram (kg), and potentially $4/kg in five years for projects coming online in the early 2030s.
“They talk about $3/kg or $2.5/kg, but you could only get there by offering incentives such as subsidies, concessionary finance, free land, free infrastructure and offtake guarantees,” notes Liebreich.
While the region has very cheap solar power, a $15 a megawatt-hour (MWh) solar tariff does not necessarily lead to cheap hydrogen because it is only available roughly 25% of the time. To get to 24/7, one needs batteries, and in jurisdictions like Abu Dhabi, this will take the price to roughly $50/MWh.
Adds Liebreich: “And since you need 50kWh of power per kilogram of hydrogen, assuming an 80% efficiency, that means you have $2.50/kg just of electricity cost. No capex, no maintenance, no compression, no pipelines, nothing. So $4/kg looks like being a floor price for a long time; $3/kg would be the outside edge of achievable.”
Meanwhile, fossil gas at around $1-1.50/kg creates an extra cost of $2.50/kg, which means that anyone producing a million tonnes of green hydrogen a year has to cover the extra cost of $2.5bn a year and find at least 15 years of guaranteed offtake to get the project built.
“You need to secure 15 years of support to close the cost gap of $37.5bn. You need it guaranteed upfront by someone with a bullet-proof balance sheet – so that’s either a government or sovereign wealth fund.”
The near-impossibility of exporting liquid hydrogen to Europe due to prohibitive costs and inefficiency of liquefying the hydrogen should also be considered.
In comparison, a more feasible option could be putting ammonia on a ship to Europe, where it could benefit from a Carbon Border Adjustment Mechanism (CBAM) at the same price as a tonne of carbon under EU-ETS.
According to Liebreich, under this scenario, each kilogram of green hydrogen reduces emissions by around 9kg, and the EU-ETS price today is €72 ($81)/tonne.
“So each kilogram of green hydrogen will avoid a carbon price of $0.009 x 81, which is equal to $0.72. That closes your gap, so a tonne of green ammonia is now only $320 more than a tonne of grey, or only double the price,” Liebreich explains.
“Look at it another way, if you want to export 1 million tonnes of hydrogen as ammonia a year into Europe, you are still looking at an annual cost gap of $1.8bn after taking the EU-ETS CBAM into account. And you need a 15-year deal, so that’s $27bn,” he notes, under the assumption one can get the hydrogen price down to $4/kg.
Far from being rosy, Liebreich concludes that green hydrogen-wise, the region could be heading down a blind alley. “There will be almost no import market for green hydrogen or its derivatives because, in the best scenario, they will remain too expensive.”
Bright side
Liebreich’s dour forecast collides with the vision of most regional stakeholders that net zero by 2050 will not be possible without low-carbon, and particularly green, hydrogen and its derivatives, including green ammonia, methanol and sustainable aviation fuel.
Mohammad Abdelqader El-Ramahi, chief green hydrogen officer at Abu Dhabi Future Energy Company (Masdar), for instance, told MEED in October that green hydrogen is the most important driver and enabler of net zero and decarbonisation. “Very few people know that electrification alone can address no more than 30% of our decarbonisation [needs], even if we install all sorts of renewable sources,” he said.
Abu Dhabi intends to replicate its success in the energy sector’s previous four waves – oil and gas in the 1960s, liquefied natural gas and anti-flaring in the 1970s, renewable energy in the 2000s and nuclear energy in the 2020s – in the sector’s fifth low-carbon hydrogen wave.
The list of Masdar’s potential green hydrogen partners includes Ireland-headquartered Linde; France’s TotalEnergies; the UK’s BP; Austria’s Verbund; and Japan’s Mitsui, Osaka Gas, Mitsubishi Chemical, Inpex and Toyo Gas.
Despite the slow progress and major reality check, hope proverbially springs. “Green hydrogen is the inevitable future fuel,” El-Ramahi asserted.
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Wood wins Iraq oil and gas contracts
29 May 2025
The UK-based engineering company Wood has been awarded a series of decarbonisation contracts with a total value of about $100m for flare gas reduction and carbon efficiency project solutions across Iraq’s largest oil fields.
Under the terms of the contracts, Wood will deliver brownfield engineering, procurement and construction (EPC) and modifications solutions to “enhance operational efficiency and minimise environmental impacts”, according to statement released by the company.
In its statement, Wood said that the projects would support Iraq’s commitment to reduce gas flaring by 78% by the end of 2025.
Wood has already provided decarbonisation solutions for major operators in Iraq and has implemented the country’s largest flare gas reduction programme to date.
Ellis Renforth, Wood’s president of operations for Europe, Middle East and Africa, said: “We are working in partnership with our clients to achieve Iraq’s energy ambitions and deliver a sustainable energy future for the country.
“Wood Iraq has extensive knowledge of our clients’ infrastructure, operations and goals, enabling them to improve operational efficiency and reduce the impact of gas flaring while maintaining critical production.”
The reimbursable contracts will be delivered by Wood’s team in Iraq and the UAE.
The company said it would recruit 60 new employees to support the successful delivery of these projects.
Money problems
Earlier this month, Wood announced that its chairman, Roy Franklin, would step down from the board.
The move comes amid ongoing financial problems at the engineering company, which is working on projects worth tens of billions of dollars across the Middle East and North Africa region.
At the end of April, Wood Group’s shares were suspended on the London Stock Exchange because the company did not publish its accounts for 2024 on time.
Wood employs over 4,000 people in the Middle East, having increased its headcount by 500 in 2024.
MEED’s June 2025 report on Iraq includes:
> COMMENT: Iraq maintains its pace, for now
> ECONOMY: Iraq’s economy faces brewing storm
> OIL & GAS: Iraqi energy project value hits decade-high level
> PIPELINES: Revival of Syrian oil export route could benefit Iraq
> POWER: Iraq power sector turns a page
> CONSTRUCTION: Iraq pours billions into housing and infrastructure projects
> DATABANK: Iraq forecast dips on lower oil priceshttps://image.digitalinsightresearch.in/uploads/NewsArticle/13974910/main.png -
BP considers Algeria lubricants plant project
29 May 2025
The UK-based oil and gas company BP is considering developing a facility in Algeria to produce products for its Castrol lubricants business, according to industry sources.
BP has been considering developing the facility for some time, but has yet to make a final decision on whether to proceed with the project.
One source said: “BP is continuing to evaluate the business case for developing the facility.”
BP’s upstream business exited Algeria with the sale of its assets to Italy’s Eni in a deal announced in September 2022.
That deal included selling its interests in the gas-producing In Amenas and In Salah concessions.
BP’s Castrol brand serves consumers in more than 150 countries in various sectors, including automotive, marine and industrial.
Its passenger car engine oils include Edge, Magnatec and GTX.
Its products also include commercial vehicle engine oils, transmission fluids, metalworking and machining fluids, production fluids, and specialist greases and lubricants.
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