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
  • Aramco executive becomes Samref chairman

    17 July 2026

    Saudi Aramco Mobil Refinery Company (Samref) has announced the appointment of Abdullah Bin Saleh Al-Suwailem as the chairman of its board of directors.

    Al-Suwailem serves as senior vice president of Western Region manufacturing at Saudi Aramco.

    Prior to being appointed chairman, Al-Suwailem had been a member of the Samref board since .

    Samref is the downstream joint venture of Aramco and US oil and gas producer ExxonMobil. The entity owns a crude refining facility located in Yanbu on Saudi Arabia’s west coast, which entered operations in November 1984.

    The Samref refinery has a capacity of 400,000 barrels a day (b/d) and mainly produces propane and several grades of automotive diesel oil, two grades of marine heavy fuel oil and sulphur.

    In a , Samref said that Al-Suwailem “brings more than 30 years of leadership across the refining and petrochemicals sectors, having led some of the kingdom's most significant industrial joint ventures”.

    “We expect his deep expertise in governance and large-scale operations to be invaluable as Samref continues its journey of growth and operational excellence. We look forward to his leadership in steering the board's strategic direction,” Samref added.

    Aramco and ExxonMobil signed a memorandum of understanding (MoU) in May 2025 to evaluate a significant upgrade of the Samref complex and expand the oil refining facility into a world-class integrated petrochemicals complex.

    The MoU between Aramco and ExxonMobil to upgrade the Yanbu refinery and convert the facility into an integrated refining and petrochemicals complex was signed at the Saudi-US Investment Forum held in Riyadh on 13-14 May 2025, during US President Donald Trump’s state visit to Saudi Arabia.

    MEED understands that the Samref petrochemicals expansion project is one of the schemes that comprise Aramco’s $100bn liquids-to-chemicals programme.

    Aramco has divided its liquids-to-chemicals programme into four main projects and has taken steps forward this year by signing joint-venture investment agreements with foreign partners for these schemes:

    • Conversion of the Saudi Aramco Jubail Refinery Company (Sasref) complex in Jubail into an integrated refinery and petrochemicals complex through the addition of a mixed-feed cracker. The project also involves building an ethane cracker that will draw feedstock from the Sasref refinery. Front-end engineering and design (feed) on the project is under way and is being performed by Samsung E&A, although progress has been slow.
    • Conversion of the Yanbu Aramco Sinopec Refining Company (Yasref) complex in Yanbu into an integrated refinery and petrochemicals complex through the addition of a mixed-feed cracker. China’s Sinopec is a joint-venture partner in the project.
    • Conversion of the Saudi Aramco Mobil Refinery Company (Samref) complex in Yanbu into an integrated refinery and petrochemicals complex through the addition of a mixed-feed cracker. US oil and gas producer ExxonMobil, Aramco and Samref signed a venture framework agreement in December to begin preliminary feed work on the project.
    • Building a crude oil-to-chemicals complex in Ras Al-Khair in the Eastern Province. Progress on this project remains slow.

    The central aim of the strategic programme is to derive greater economic value from every barrel of crude produced in Saudi Arabia by converting 4 million b/d of Aramco’s oil production into high-value petrochemicals and chemicals feedstocks by 2030.

    Aramco and its subsidiary Saudi Basic Industries Corporation (Sabic) were tasked with establishing 10-11 large mixed-feed crackers by 2030. These petrochemicals crackers, which included greenfield developments and expansions of existing facilities, were to be built both in Saudi Arabia and in overseas markets.

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

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17697004/main.gif
    Indrajit Sen
  • Accor expects Dubai hotel recovery by mid-2027

    17 July 2026

     

    Paris-headquartered hotel operator Accor expects Dubai’s hotel market to return to pre-conflict occupancy levels by the end of the first quarter or early second quarter of 2027, with room rates lagging the volume recovery by several months.

    Duncan O’Rourke, chief executive for the Middle East, Africa and Asia Pacific at the hotel operator (pictured right), said the group had maintained profitability across its Dubai portfolio during the conflict period through cost control and revenue management, but acknowledged that rates and occupancy had fallen materially from January and February levels.

    “There is no question that this crisis affected Dubai,” O’Rourke said at a media briefing in Dubai on 26 June. “As for occupancy in Dubai, we managed – through profit protection and cost control – to keep the hotels in a positive position, so we weren’t losing money.”

    He said the arrival of the summer low season provided a degree of relief. “If there is a time to slowly slide out of this crisis, it is the right time, which is now. What I see going forward is that volumes will come back. You will not have the rates immediately that you had in January and February. By the end of Q1 or Q2 next year, I think you will get close to where we were.”

    Luxury first

    O’Rourke said the luxury and upper-upscale segment was likely to lead the recovery, consistent with the pattern observed after previous crises.

    “Generally, when you have a crisis, the first segment to click back quicker is the high-end luxury. People then think: it is not about whether I should go – it is, let’s go. We saw that in Covid. Fairmont is well positioned to do that, and the Sofitel and Maison brands are in the stage of recovery going forward.”

    Jean-Jacques Morin, group deputy chief executive at Accor (pictured right), said the UAE’s underperformance had been contained within Accor’s broader international portfolio that continued to grow.

    “The Middle East is about 10% of the network,” he said. “That also explains why my tone on the capability of the results is so positive – not only do you have the hedging across geographies, but it is also, in the end, only one part of the business.”

    Rate outlook

    Morin dismissed concerns that the conflict had structurally weakened Dubai’s pricing power, drawing a parallel with the period following Covid-19.

    “When we came out of Covid, everybody said those prices would never hold. The question at every analyst call was always the same: your pricing strategy is unsustainable. Guess what? Nothing changed. The prices now, three or four years later, are still the same.”

    He argued that consumers consistently prioritise travel expenditure when reallocating budgets. “What you see when the economy goes sideways is that people reallocate disposable income differently. People are basically redirecting the way they do things and keeping the same amount they want to spend, but spending it differently.”

    Morin also said Dubai has a track record of outpacing expectations after previous disruptions. “The first part of the world, post-Covid, that came back to positive RevPAR was the Middle East – it was Dubai. People forget that. The capacity of this part of the world to rebound, and the capacity of the industry to rebound in general, is always misunderstood.”

    No pullback

    Accor said it had not paused or cancelled any development commitments in the region as a result of the conflict. “We did not change anything from a strategic perspective,” Morin said. “The last thing you want is to pull back, because this is going to rebound.”

    The group has also used the period to accelerate planned refurbishments and redeploy staff across the region rather than reduce headcount.

    “We have 380 hotels here – we are the largest player in the Middle East. Where we accelerated refurbishments, we were able to take key employees and move them to larger hotels elsewhere in the region. What people learned during Covid was the cost of layoffs afterwards – bringing people back and retraining them. There was a massive learning curve. This time, discussions with partners about layoffs were less challenging; it was more about accommodating staffing needs during that period,” O’Rourke said.

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

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17695301/main.gif
    Colin Foreman
  • CCC selected for $600m Damascus Financial Centre

    17 July 2026

    Register for MEED’s 14-day trial access 

    Syrian developer Souria Holding has selected Consolidated Contractors Company (CCC) as the exclusive design-and-build contractor for the $600m Damascus Financial Centre (DFC) in Syria.

    The two parties signed a memorandum of understanding on 6 July. The agreement covers design management, engineering, procurement, construction, testing and commissioning, handover and defects liability services. Souria Holding chairman Haytham Joud and CCC chairman Samer Khoury signed the agreement.

    Souria Holding is developing the project in partnership with the Governorate of Damascus. The developer says the scheme is intended to support the city's long-term economic revitalisation and urban development.

    The mixed-use development sits on Plot 47 in the Western Hejaz regulatory area of Damascus' Baramkeh district. The site covers about 32,000 square metres (sq m) and the development will have about 380,000 sq m of built-up area, making it one of the largest mixed-use schemes planned in Syria.

    The DFC comprises a five-star hotel, including furnished apartments and serviced apartments; two residential towers; three grade-A office towers on a core-and-shell basis; retail and commercial space at ground and underground levels; and four basement levels for parking and supporting infrastructure.

    The first phase of construction involves the delivery of three office buildings with a total above-ground built-up area of 72,000 sq m. The completion deadline is the fourth quarter of 2028.

    Lebanon’s Dar Al-Handasah is the frontrunner for the design consultancy role, working for CCC as the design-and-build contractor.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17695284/main5621.jpeg
    Colin Foreman
  • GCC downstream operators urged to seek used European equipment

    17 July 2026

     

    The operators of downstream oil and gas facilities in the GCC that are rebuilding after attacks during the regional war are being advised by the insurance industry to procure used equipment from Europe, where a large number of petrochemical facilities have closed down over recent years.

    A wide range of refineries and petrochemical plants in the region are currently undertaking repairs and replacing damaged equipment after attacks by Iran.

    The attacks started after the US and Israel launched attacks on sites in Iran on 28 February.

    Nick Holland, the head of engineering for India, the Middle East and Africa at the US-based insurance broker Marsh, says that many downstream facilities carrying out repairs in the GCC could cut costs and reduce the time it takes to rebuild by making deals with companies in Europe.

    “Many plants have shut down in Europe over the past five years,” he says. “These refinery and chemical-plant closures may create an opportunity for Gulf operators to acquire high-quality used equipment.

    “We have some incredible demand in the Middle East to recover as quickly as possible, and I would certainly be encouraging operators to take the opportunity to procure second-hand equipment from facilities that have closed down in Europe.”

    Earlier this month, Jim Ratcliffe, the chairman of the London-headquartered chemicals company Ineos, wrote an open letter to Ursula Von Der Leyen, the president of the European Commission, saying that the chemical industry in Europe is “highly stressed” and in the midst of a “closure phase”.

    He said that nearly 200 European chemical plants had closed down during the past five years.

    Holland says that companies in the GCC looking to minimise business disruption and rebuild as quickly as possible should reach out to companies in Europe to obtain equipment that would normally take a long time to procure from equipment manufacturers.

    “A new large high-pressure reactor could have a lead time of approximately 110 weeks, so adapting an existing reactor could significantly accelerate recovery,” he says.

    “Other possible items include pumps, compressors, rotating equipment and boilers.

    “Reusing equipment is unusual but not unprecedented. Used equipment would require inspection, remaining-life assessment, re-engineering and confirmation that it is fit for the new operating conditions.”

    Over recent months, there have been reports of downstream oil facilities being hit by Iranian attacks in Saudi Arabia, Kuwait, the UAE and Bahrain.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17692930/main.jpg
    Wil Crisp
  • Medina tenders Quba Mosque expansion

    17 July 2026

     

    Register for MEED’s 14-day trial access 

    Madinah Region Development Authority (MRDA) has tendered a contract to expand Quba Mosque in the Medina region of Saudi Arabia.

    The tender was issued earlier this month, with a bid submission deadline of 31 August.

    MRDA has appointed local consulting firm Jasara as the project management consultant.

    Jasara, in turn, has appointed London-based firm HKA to provide specialist procurement and delivery-model advice and to support the selection of a suitable contracting partner for the project.

    Dar Al-Omran has prepared the design for the expansion.

    Quba Mosque is located about five kilometres south of the Prophet’s Mosque in Medina.

    Project background

    Quba Mosque is considered the first mosque established in Islam, in 622 AD. The proposed expansion will increase the mosque’s area from 5,035 square metres (sq m) to 53,000 sq m and raise capacity to 66,000 worshippers, from 12,000.

    The expansion will also include the restoration of 57 historical sites and the creation of three pathways to enhance Medina’s spiritual and cultural landscape.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17691327/main.jpg
    Yasir Iqbal