meed-logo

line1 line2 line3
SIGN IN / REGISTER

Trump factor weighs on the region’s economies

2 January 2025

 

If 2024 was a slow road back to stabilisation for economies in the Middle East and North Africa (Mena) region, with lower interest rates and generally improved fiscal positions providing some ballast against tumultuous geopolitical risk events, the coming year portends yet more instability with the return to the White House of Donald Trump. This will, for good or ill, have a decisive impact on the region’s economic trajectory. 

The region is looking at a more rapid economic growth rate in 2025 than the previous year. The World Bank, which estimated real GDP growth in the Mena region of 2.2% in 2024, sees region-wide growth at 3.8% in 2025, with Gulf economies driving this improvement. 

This reflects the gradual phasing out of voluntary oil production cuts starting from December 2024. 

Mena oil importers will see real GDP growth expand from just 1.3% in 2024 to 3.4% in 2025, says the World Bank. 

Interest rates are a key ingredient in the mix, linking to the second Trump presidency, with its likely ramp-up of  global trade-war pressures. 

If the president-elect follows through on his tariff plans, which range from a proposed 60% on Chinese imports to 20% on the rest of the world, it will trigger higher inflation, thereby slowing the Federal Reserve’s moves to cut interest rates.

So while Mena exports to the US are unlikely to suffer direct fallout from planned tariffs – according to consultancy Capital Economics, the share of Mena goods exports going to the US stood at just 3.5% this decade – it is the secondary effects that could knock regional economies off their stride.

“If we do get the tariffs, and that leads to higher inflation in the US, that also means there will be tighter monetary policy in the Gulf countries with dollar pegs than would otherwise be the case,” says James Swanston, Mena economist at Capital Economics.

The possibility of a stronger dollar in 2025 means that for those economies with dollar pegs, their domestic industries could become less competitive. This jars with the thinking behind regional economic diversification schemes such as Saudi Arabia’s Vision 2030, which are predicated on developing manufacturing sectors that are mainly export-oriented.

Regional fortitude

The largest Gulf economies should at least be well positioned to withstand such headwinds, even if a trade war hits the global economy. According to the World Bank, a lower interest rate environment, together with further investment and structural reform initiatives, will yield non-oil growth of more than 4% in the region’s two largest economies, Saudi Arabia and the UAE. This – plus higher oil production – should be enough to offset any loss of momentum from lower oil prices and weaker fiscal balances.

Saudi Arabia is expected to show steady growth in 2025, with its Q3 2024 average GDP growth of 2.8% underscoring the kingdom’s stronger performance. However, the robust spending of past years is giving way to a more conservative fiscal approach, and that will inevitably impact project activity.

Riyadh’s 2025 pre-budget statement revealed a tougher fiscal stance for 2025, with anticipation of a deficit of 2.9%. With revenues expected to be 3.5% weaker in year-on year terms in 2025, this will mean reduced spending – around 3% lower than that outlined in the 2024 budget. 

“Saudi Arabia is being a bit more prudent about how they spend their money,” says Swanston. 

While there will be continued support for current spending, and for the official gigaprojects, capital expenditure will shoulder the burden of cuts. This will likely feed through to weaker non-oil GDP growth.

The UAE should see comparatively stronger growth momentum in 2025, driven by a combination of healthier dynamics in its touchstone real estate and tourism sectors, and the impact of infrastructure investment programmes. 

NBK Economic Research sees the UAE non-oil economy enjoying another year of 4%-plus growth in 2025, possibly as high as 5.1%. However, the bank’s economists offer a note of caution, as this is still below the 7.2% annual average growth rate the government requires to achieve the Vision 2031 target of a doubling in GDP by 2031.

On the fiscal front, the UAE is looking at a better situation in 2025. “The UAE has diversified its revenues to the point where non-oil revenues are larger than oil revenues. So, even if oil prices turn negative, they still wouldn’t run a deficit,” says Swanston.

Qatar is maintaining a tight fiscal policy, but from late 2025 it will begin to feel the effects of a significant predicted revenue boost when the first phase of its liquefied natural gas (LNG) expansion comes on stream. This will eventually add 40% to the country’s existing LNG export capacity of 77 million tonnes a year.

Kuwait, meanwhile, is set to run continued budget deficits, although the country’s non-oil economy has emerged from two years of negative growth and is forecast by NBK Research to expand by 2.6% in 2025. But Kuwait faces structural challenges, including a low investment rate and the need for fiscal consolidation, which will absorb policymakers in 2025. 

Oman, in contrast, looks to be in a better position than in previous years. According to an Article IV assessment released by the Washington-headquartered IMF in November, reform implementation under Oman Vision 2040 is proceeding decisively, along with initiatives to improve the business environment, attract large-scale investments and empower small and medium-sized enterprises. 

The sultanate’s economy continues to expand. Growth, says the IMF, is set to rebound starting in 2025, supported by higher hydrocarbons production and the continued acceleration of non-hydrocarbons growth. 

Bahrain faces a challenge when it comes to containing the country’s rising debt-to-GDP ratio, which grew from 100% in 2020 to just under 130% in 2024. The country needs to press ahead with fiscal consolidation moves if it is to improve the debt position.

Wider region

Outside the GCC, the picture will vary in 2025. Egypt has realistic expectations of a better year ahead, with falls in inflation and interest rates providing relief after a tough 2024. But foreign investors may feel a note of alarm at recent indications from President Abdul Fattah El-Sisi that the challenges associated with the country’s reform programme – a hint at the tough impact of reform on Egyptian consumers – might lead it to review its existing IMF deal. 

Tunisia presents a similar challenge. President Kais Saied’s proposed bill stripping the central bank of its ability to set interest rates and influence exchange rate policy without government consent is unlikely to encourage investors. 

In Egypt at least, there are silver linings that should assure investor confidence, even if the government’s commitment to reform wavers. “When it comes to the debt issue, everything’s in a pretty good place in Egypt,” says Swanston. 

“Yes, interest service payments on the debt have risen over the past 12 months, and the feed-through means that they will still be paying quite high debt servicing costs over the next six months. But yields are coming down in terms of its dollar-denominated debt. Worries about default are not as strong as before.”  

President El-Sisi may also find support from other sources. Given his previous close ties with the Trump administration in 2016-20, there may be a greater willingness in Washington to disburse funds to such an integral partner of US foreign policy, particularly when it has been buffeted by the Gaza conflict and the impact of Houthi attacks in the Red Sea.

Iraq’s economic fortunes remain bound up with the price of oil, which accounts for 90% of state revenues. The IMF has forecast a 4.1% GDP growth rate for Iraq in 2025, reflecting in part its surprising resilience to regional conflicts. However, lower oil prices may yet erode the country’s economic momentum. 

Progress on major projects such as the Development Road would at least suggest prime minister Mohammed Shia Al-Sudani’s government is focused on long-term delivery and tackling Iraq’s overreliance on hydrocarbons exports. 

Meanwhile, Iraq’s larger neighbour Iran, which saw GDP growth increase to 5% in the 2023-24 Iranian year, faces still bigger challenges linked to Trump’s return. It can expect to face a much tighter sanctions regime on its oil sector in 2025, with efforts to curb its ability to sell its crude oil on international markets expected to gain traction. The effects of these moves are still in the balance. 

The positive news for Tehran is that several of its crude buyers appear to be undaunted by a reimposition of deeper curbs on exports. For example, Chinese refiners have been importing Iranian oil to the tune of 1.5 million barrels a day. The country’s seeming imperviousness to international financial pressures could undercut the impact of a beefed-up US sanctions regime, although few would relish being in the shoes of Iranian economic policymakers right now.

 

https://image.digitalinsightresearch.in/uploads/NewsArticle/13211797/main.gif
James Gavin

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

Click here to register
Exclusive from Meed
Related Articles
  • SLB passes evaluation for Kuwait upstream project

    12 December 2025

    The US-based oilfield services company SLB, formerly Schlumberger, has passed the technical bid evaluation for a major project to develop Kuwait’s Mutriba oil field.

    The Houston-headquartered company was the only bidder to pass the technical evaluation for the Mutriba integrated project management (IPM) contract.

    The minimum passing technical evaluation score was 75%.

    The full list of bidders was:

    • SLB (US): 97%
    • Halliburton (US): 72%
    • Weatherford (US): 61.5%

    The decision was finalised at a meeting of the Higher Purchase Committee (HPC) of state-owned Kuwait Petroleum Corporation (KPC) on 20 November 2025.

    According to a document published earlier this year by KOC, the IPM tender for the Mutriba field aims to “accelerate production through a comprehensive study that includes economic feasibility evaluation, well planning and long-term sustainability strategies”.

    The field was originally discovered in 2009.

    Commercial production from the Mutriba field started earlier this year, on 15 June, after several wells were connected to production facilities.

    The field is located in a relatively undeveloped area in northwest Kuwait and spans more than 230 square kilometres.

    The oil at the Mutriba field has unusually high hydrogen sulfide content, which can be as much as 40%.

    This presents operational challenges requiring specialised technologies and safety measures.

    In order to start producing oil at the field, KOC deployed multiphase pumps to increase hydrocarbon pressure and enable transportation to the nearest Jurassic production facilities in north Kuwait.

    The company also built long-distance pipelines stretching 50 to 70 kilometres, using high-grade corrosion-resistant materials engineered to withstand the high hydrogen sulfide levels and ensure long-term reliability.

    KOC also commissioned the Mutriba long-term testing facility in northwest Kuwait, with a nameplate capacity of around 5,000 barrels of oil a day (b/d) and 5 million standard cubic feet of gas a day (mmscf/d).

    Once this facility was commissioned, production stabilised at 5,000 b/d and 7 mmscf/d.

    In documents published earlier this year, KOC said that starting production from the field had “laid a solid foundation” for the IPM contract by generating essential reservoir and surface data that will guide future development.

    Future output from the field is expected to range between 80,000 and 120,000 b/d, in addition to approximately 150 mmscf/d of gas.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15235579/main.png
    Wil Crisp
  • Dana Gas makes onshore discovery in Egypt

    12 December 2025

    Register for MEED’s 14-day trial access 

    UAE-based Dana Gas has made an onshore gas discovery in Egypt’s Nile Delta area, according to a statement from the company.

    The discovery was made by the drilling of the North El-Basant 1 exploratory well, and initial well results indicate estimated reserves of 15-25 billion cubic feet of gas.

    Production from the reserve is expected to exceed 8 million cubic feet a day (cf/d) once the well is connected to the national network.

    The North El-Basant 1 exploratory well was the fourth well in a campaign of 11 development and exploration wells.

    The campaign is being executed as part of the company’s $100m investment programme to support domestic gas production, increase reserves and meet growing energy demand.

    Earlier this year, Dana Gas completed the drilling of three wells, adding 10 million cf/d.

    The programme is expected to increase long-term production and add approximately 80 billion cubic feet of recoverable gas reserves, according to Dana Gas.

    Dana Gas expects to start drilling the fifth well in the programme, the Daffodil exploration well, in the first week of January 2026.

    Richard Hall, the chief executive of Dana Gas, said: “The latest drilling success reinforces the value of our investment programme in Egypt and highlights the significant remaining potential within the Nile Delta.”

    He added: “By increasing local gas production, the programme will help reduce Egypt’s reliance on imported liquefied natural gas (LNG) and fuel oil and is expected to generate more than $1bn in savings for the national economy over time.”

    Previously, Dana Gas signed an agreement with state-owned Egyptian Natural Gas Holding Company (EGas) to secure additional acreage under improved fiscal terms, and to accelerate drilling activity.

    Hall said: “We appreciate the strong cooperation from EGas and the ministry, and we remain committed to delivering the majority of our planned programme next year.

    “Regular and timely payments from our partners are crucial to sustaining our investment programme in Egypt."

    In November, a new gas discovery was made in Egypt’s Western Desert region by Khalda Petroleum Company, a joint venture of state-owned Egyptian General Petroleum Corporation and US-headquartered Apache Corporation.

    Egypt also started gas production from the West Burullus field in the Mediterranean Sea, after connecting the first wells to the national gas grid.

    The country is currently pushing to increase gas production in order to meet domestic demand and reduce its import bill.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15235552/main.png
    Wil Crisp
  • SAR to tender new phosphate rail track section in January

    12 December 2025

     

    Register for MEED’s 14-day trial access 

    Saudi Arabian Railways (SAR) is expected to float another multibillion-riyal tender to double the tracks on the existing phosphate railway network connecting the Waad Al-Shamal mines to Ras Al-Khair in the Eastern Province.

    MEED understands that the new tender – covering the second section of the track-doubling works, spanning more than 150 kilometres (km) – will be issued in January.

    The new tender follows SAR’s issuance of the tender for the project's first phase in November, which spans about 100km from the AZ1/Nariyah Yard to Ras Al-Khair.

    The scope includes track doubling, alignment modifications, new utility bridges, culvert widening and hydrological structures, as well as the conversion of the AZ1 siding into a mainline track.

    The scope also covers support for signalling and telecommunications systems.

    The tender notice was issued in late November, with a bid submission deadline of 20 January 2026.

    Switzerland-based engineering firm ARX is the project consultant.

    MEED understands that these two packages are the first of four that SAR is expected to tender for the phosphate railway line.

    The other packages expected to be tendered shortly include the depot and the systems package.

    In 2023, MEED reported that SAR was planning two projects to increase its freight capacity, including an estimated SR4.2bn ($1.1bn) project to install a second track along the North Train Freight Line and construct three new freight yards.

    Formerly known as the North-South Railway, the North Train is a 1,550km-long freight line running from the phosphate and bauxite mines in the far north of the kingdom to the Al-Baithah junction. There, it diverges into a line southward to Riyadh and a second line running east to downstream fertiliser production and alumina refining facilities at Ras Al-Khair on the Gulf coast.

    Adding a second track and the freight yards will significantly increase the network’s cargo-carrying capacity and facilitate increased industrial production. Project implementation is expected to take four years.

    State-owned SAR is also considering increasing the localisation of railway materials and equipment, including the construction of a cement sleeper manufacturing facility.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15229624/main.jpg
    Yasir Iqbal
  • Dar Global to develop $4.2bn Oman mixed-use project

    10 December 2025

    Register for MEED’s 14-day trial access 

    Saudi Arabia-headquartered real estate developer Dar Global has announced that it will develop a mixed-use project in Muscat at an estimated investment of RO1.6bn ($4.2bn).

    Dar Global will co-develop the Muscat Marine, Art & Digital District project with Oman's Art District Real Estate Development Company.

    The project will cover an area of over 1.5 million square metres (sq m) and will be developed in several phases over 12 years.

    The development will comprise a mix of residential communities, cultural venues, marinas, retail spaces, finance and business parks and hotels.

    Dar Global, a subsidiary of Dar Al-Arkan, was one of the first Saudi brands to list on the London Stock Exchange.

    Dar Al-Arkan established Dar Global in 2017 to focus on developing projects in the Middle East and Europe, including in Dubai, Qatar, Oman, London and the Costa del Sol in southern Spain.

    Dar Global has $12bn-worth of projects under development in six countries: the UAE, Oman, Qatar, Saudi Arabia, the UK and Spain.

    It completed three developments – the Urban Oasis and Da Vinci towers in Dubai and the Sidra gated community in Bosnia – in 2023.

    The company collaborates with global brands including Missoni, W Hotels, Versace, Elie Saab, Automobili Pagani and Automobili Lamborghini.

    In Oman, Dar Global is also developing the Aida project. In May, it awarded a contract to develop the villas and apartments as part of the project.

    According to an official statement, the construction works are expected to start immediately and the project is slated for completion in 2026.

    The main contract was awarded to local firm Al-Adrak Trading & Contracting.

    The latest announcement follows the awarding of contracts in June last year for the development of the first phase of the Aida project.

    The Aida project is being developed as a joint venture with Omran Group and the first phase is expected to be completed in 2027.

    UK analytics firm GlobalData forecasts that the Omani construction industry will expand at an annual average growth rate of 4.2% in 2025-28. Growth in the country will be supported by rising government investments in renewable energy, the transport infrastructure and the housing sector, all as part of Oman's Vision 2040 strategy.

    Growth during the forecast period will also be supported by increasing hospitality sector investments, with the government planning to invest RO11.9bn ($31bn) in tourism development projects by 2040 and supporting the construction of several hospitality projects.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15222694/main.jpg
    Yasir Iqbal
  • Contract award nears for Saudi Defence Ministry headquarters

    10 December 2025

     

    Saudi Arabia’s Defence Ministry (MoD) is preparing to award the contract to build a new headquarters building, as part of its P-563 programme in Riyadh.

    MEED understands that bid evaluation has reached advanced stages and the contract award is imminent.

    The MoD issued the tender in April. The commercial bids were submitted in September, as MEED reported.

    Located to the northwest of Riyadh, the P-563 programme includes the development of facilities and infrastructure to support the MoD’s broader initiatives under the kingdom’s Vision 2030 strategy.

    It covers the construction of:

    • A new military city featuring the MoD headquarters, support and logistics facilities, a residential and commercial community and space for future command centres
    • A National Defence University with a library, conference centre and academic buildings
    • A self-sustaining Joint Forces Command compound located approximately 50 kilometres from the military city

    The budget for the entire programme is expected to be $10bn-$12bn.

    In September 2023, MEED reported that Spain-headquartered Typsa had won two contracts for the project.

    The first contract, worth $11.4m, included data management, geographic information systems management, geotechnical reporting and the preparation of the phase one final traffic report. The contract duration was 270 days from the notice to proceed.

    The second contract, valued at $10.8m, involved preparing four conceptual masterplans for the P-563 site. It was set to last 255 days from the notice to proceed.

    These followed a $290m consultancy contract awarded to Typsa in March of the same year. The single-award task order covered a three-year base period, with an optional two-year extension.

    Typsa’s scope of work included programme management planning, communications, change and quality management and cost and schedule tracking.

    It also included design requirements, codes, standards and submission requirements, programme guidance, study integration, risk analysis and management, design reviews and a programme-of-work breakdown plan.

    READ THE DECEMBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Prospects widen as Middle East rail projects are delivered; India’s L&T storms up MEED’s EPC contractor ranking; Manama balances growth with fiscal challenges

    Distributed to senior decision-makers in the region and around the world, the December 2025 edition of MEED Business Review includes:

    > BAHRAIN MARKET FOCUS: Manama pursues reform amid strain
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15222401/main.gif
    Yasir Iqbal