Region heads into another economic storm
2 May 2025
Commentary
Colin Foreman
Editor
Read the May issue of MEED Business Review
US President Donald Trump’s launch of a new tariff regime on 2 April sent shockwaves around the world as markets feared a prolonged trade war and a resetting of the global economy.
In the Middle East, the impact was felt on the region’s stock markets, but the panic was muted compared to other markets thanks largely to most countries in the region only being subject to the 10% flat rate tariff – which is now paused for 90 days – coupled with the fact the region exports little to the US, and much of what it does export is exempt from the new trade rules.
The economic storm for the region stems from the drop in oil prices, caused by the dampened outlook for the global economy and energy demand, and the decision by Opec+ to increase production. Between 2 April and 22 April, Brent crude prices fell 8.2%.
The concern is that government budgets will come under pressure and capital expenditure projects will be constrained, based on behaviour during previous oil price slumps.
The other concern is the drop in the value of the US dollar. Between 2 April and 22 April, the value of the US dollar compared to the euro fell by 6.5%. The unease with the weaker dollar is that it will become more expensive for the GCC countries pegged to the dollar to buy goods. Conversely, it may be positive and make it cheaper to invest in the region, notably in real estate.
The overall direction of travel is expected to remain positive
While dropping oil revenues and the prospect of rising costs may lead to some projects being tempered or rephased, the overall direction of travel is expected to remain positive as governments in the GCC remain committed to long-term projects that will help diversify their economies.
These strategically important projects, coupled with event-driven spending programmes such as Saudi Arabia’s Expo 2030 and World Cup 2034 that must go ahead, mean that while the region is not immune to the economic volatility of trade wars, it is well inoculated.
READ THE MAY 2025 MEED BUSINESS REVIEW – clck here to view PDF
Gulf hunkers down as US tariffs let fly; Abu Dhabi looks to secure its long-term economic prosperity; Nesma stays on top as China State moves up in 2025 GCC contractor ranking
Distributed to senior decision-makers in the region and around the world, the May 2025 edition of MEED Business Review includes:
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> AGENDA 1: GCC shelters from the trade wars
> AGENDA 2: Gulf markets slide as US tariff shockwaves hit
> GCC CONTRACTORS: Contractors take on more work in 2025
> INTERVIEW: CCED seeks growth in Oman’s hydrocarbons sector
> INTERVIEW: Roshn outlines its procurement strategy
> LEADERSHIP: Rethinking investments for a lower-carbon future
> GULF PROJECTS INDEX: Gulf projects index inches upwards
> CONTRACT AWARDS: Region records $70.3bn of deal signings in Q1 2025
> ECONOMIC DATA: Data drives regional projects
> OPINION: Trump’s new world order
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