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
  • Contractors submit prices for Upper Zakum expansion project

    16 March 2026

     

    Contractors have submitted commercial proposals for the next expansion phase of the Upper Zakum offshore field development in Abu Dhabi, aimed at increasing the asset’s oil production potential to 1.5 million barrels a day (b/d).

    The offshore oil and gas production business of Abu Dhabi National Oil Company (Adnoc Offshore) has divided the UZ 1.5MMBD project’s engineering, procurement and construction (EPC) scope of work into three packages, MEED previously reported.

    Contractors submitted commercial bids for package 1 by the 23 February deadline and for packages 2 and 3 by the 27 February deadline, according to sources. The previous deadline for submission of commercial bids was 15 January.

    Adnoc Offshore is understood to have issued the main tender for EPC works for the UZ 1.5MMBD project in the third quarter of last year.

    Contractors submitted technical bids for package 1 by 21 November, while proposals for packages 2 and 3 were submitted by 14 November, MEED previously reported.

    In November 2024, MEED reported that Adnoc Offshore had awarded a contract for front-end engineering and design (feed) and pre-feed services on the project to France-headquartered contractor Technip Energies.

    A kick-off meeting between Adnoc Offshore and Technip Energies took place on 21 November 2024.

    Located 84 kilometres offshore in Abu Dhabi, Upper Zakum is the world’s second-largest offshore oil field and fourth-largest oil field.

    The UZ 1.5MMBD project is the latest crude output expansion undertaken by Adnoc Offshore at the Upper Zakum field development.

    Upper Zakum expansion

    The first phase of the programme to raise the Upper Zakum offshore field development’s oil production capacity to 1.2 million b/d was launched in 2019. The initial goal was to increase the field’s output potential to 1 million b/d by 2024, which was later increased to 1.2 million b/d, with the project execution timeline eventually extended.

    In April last year, MEED reported that Adnoc Offshore had awarded the main EPC contract for the UZ 1.2MMBD EPC-1 project to UAE-based Target Engineering Construction Company. The value of the contract was estimated to be $825m.

    The project’s main scope involved the EPC of several surface facilities and plants at the Upper Zakum offshore development’s four main artificial islands: Al-Ghallan, Umm Al-Anbar, Ettouk and Asseifiya – also known as Central Island, West Island, North Island and South Island, respectively.

    Spanish contractor Tecnicas Reunidas won the contract for the feed works on the UZ 1.2MMBD EPC-1 project in 2019. UK-headquartered Wood Group was appointed as the project management consultant for the EPC phase.

    In November 2024, MEED reported that Adnoc Offshore had also selected Target for the second phase of the Upper Zakum 1.2 million b/d project (UZ 1.2MMBD EPC-2). The value of the contract was estimated to be about $500m, according to sources.

    Target began work on the project in December last year, MEED previously reported.

    The scope of work on the UZ 1.2MMBD EPC-2 project covers the EPC of several structures on Assefiya Island.

    Adnoc Offshore performed the feed work on the UZ 1.2MMBD EPC-2 project in-house.

    Upper Zakum oil production

    Adnoc Offshore has committed to a total capital expenditure budget of approximately $30bn, along with its operating partners in the Upper Zakum hydrocarbons concession, Japan Oil Development Company (Jodco) and US-based ExxonMobil.

    The strategic objective is to first raise the asset’s oil output from 640,000 b/d to 750,000 b/d through the UZ 750 project, then to 1.2 million b/d through the two phases of the ongoing UZ 1.2MMBD project, and eventually to 1.5 million b/d.

    Zakum Development Company (Zadco), which later merged into Adnoc Offshore, awarded EPC contracts for the UZ 750 project in 2012 and early 2013.

    The $817m first package was awarded to a consortium of Abu Dhabi’s NMDC Energy (then known as National Petroleum Construction Company) and Technip Energies. Package two, the project’s largest EPC package, worth $3.7bn, was awarded to a consortium of UK-headquartered Petrofac and South Korea’s Daewoo Shipbuilding & Engineering.

    EPC work on UZ 750 began in 2014 and was completed in 2022.

    In October 2022, Adnoc Group subsidiary Adnoc Drilling set a world record for drilling the longest oil and gas well at the Upper Zakum concession, stretching 50,000 feet.

    The extended-reach wells will tap into an undeveloped part of the Upper Zakum reservoir, potentially increasing the field’s production capacity by 15,000 b/d without expanding or building any new infrastructure, Adnoc said.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15996020/main.jpg
    Indrajit Sen
  • Neom cancels The Line tunnels contracts

    16 March 2026

     

    Register for MEED’s 14-day trial access 

    Neom has cancelled the contracts related to the construction of the tunnel sections of The Line in northwest Saudi Arabia.

    In a stock exchange announcement filed on 13 March, South Korean contractor Hyundai E&C said that Neom cancelled its contract on 29 December last year.

    Hyundai E&C was executing the drill-and-blast section of The Line’s tunnels in a joint venture with Greece’s Archirodon and South Korean counterpart Samsung C&T.

    The firm said its share of the joint venture was about 35%, amounting to $483m.

    Neom awarded contracts for constructing the mountain tunnel sections of The Line in June 2022.

    The drill-and-blast works were split into four packages, with two contracting teams winning two packages each.

    The other joint-venture team comprised Spain’s FCC, the local Shibh Al-Jazira Contracting Company (Sajco) and Beijing-based China State Construction Engineering Corporation. 

    The tunnels formed part of the infrastructure backbone of Neom’s 170-kilometre The Line development, launched in January 2021.

    What began as Crown Prince Mohammed Bin Salman’s defining symbol of a post-oil Saudi Arabia unravelled with quiet finality over roughly two years. By April 2024, planners were reportedly being forced to cut the initial phase to just 2.4km by 2030.

    By July last year, with the sovereign wealth fund facing tightening liquidity, the kingdom was reported to have conducted a “strategic review” to determine whether The Line was feasible – a process described as a “recalibration” of Vision 2030.

    Resources are now being directed to projects essential for the Fifa World Cup 2034, Expo 2030, and critical housing, healthcare and education targets.

    According to media reports, the government has pivoted towards repositioning what remains of Neom as an industrial and data centre hub, leveraging the Red Sea coastline’s access to seawater cooling for artificial intelligence (AI) infrastructure.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15995688/main.gif
    Yasir Iqbal
  • Bidders get more time for Riyadh East sewage treatment plant

    16 March 2026

     

    State water offtaker Sharakat, formerly Saudi Water Partnership Company (SWPC), has extended the bid submission deadline for the Riyadh East independent sewage treatment plant (ISTP).

    The new deadline is 30 June. The original deadline was 2 April.

    The project will be developed under a build‑own‑operate‑transfer (BOOT) model with a 25‑year concession term.

    The plant will have a treatment capacity of 200,000 cubic metres a day (cm/d) in its first phase, expanding to 500,000 cm/d in the second phase.

    It includes the development of a treated sewage effluent transmission pipeline, forming part of the kingdom’s wider programme to expand wastewater treatment capacity through public-private partnerships.

    The request for proposals (RFP) was issued last October. 

    In 2024, Sharakat prequalified 53 companies that could bid for the Riyadh East ISTP, part of seven planned ISTP projects it said it would procure between 2024 and 2026

    WSP is the technical adviser and KPMG Middle East is the lead and financial adviser on the project.

    The targeted commercial operation date for the facility is 2029.

    ISTP plans

    Sharakat’s current ISTP portfolio includes 10 large plants that are operational, under construction or under tendering, with a combined initial treatment capacity of 1.79 million cm/d.

    These projects include North Taif, Jeddah Airport, West Dammam, Madinah 3, Buraydah 2, Tabuk 2, Al-Haer, Arana, Hadda and Riyadh East. 

    In December, two consortiums were selected for contracts to develop and operate the Hadda and Arana ISTP projects in Mecca province.

    That same month, Sharakat prequalified 63 developers for upcoming ISTP projects under a revised prequalification process.

    According to Sharakat’s newly released seven-year statement, it has identified six additional large ISTPs in the development pipeline.

    These include:

    • Kharj (75,000 cm/d)
    • Abu Arish (50,000)
    • Hafar Al-Batin (100,000)
    • Riyadh North (TBD)
    • Najran South (50,000)
    • Khamis Mushait (50,000)

    The company is also pursuing a nationwide small sewage treatment plant programme covering about 139 smaller ISTPs grouped into seven clusters.

    These are designed to add roughly 521,450 cm/d of additional treatment capacity across the kingdom.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15993509/main.jpg
    Mark Dowdall
  • Modon launches Tara Park on Abu Dhabi’s Reem Island

    16 March 2026

    Abu Dhabi-based Modon Holding has launched the Tara Park residential project in the Reem Island area.

    The project comprises two residential towers with a total of 340 residential units.

    The development includes a 527-metre jogging track.

    The latest project launch follows Modon Holding’s launch of the Bashayer residential waterfront community on Hudayriyat Island.

    The project will comprise 157 four- and five-bedroom villas centred around a clubhouse with a rooftop infinity pool, and 330 one- to four-bedroom apartments across two low-rise buildings.

    The development comprises a 3.5-kilometre waterfront promenade and a park.

    In October last year, Modon Holding launched the Maysan residential development on Abu Dhabi’s Reem Island.

    This development covers an area of about 600,000 square metres.

    Maysan is being developed in several phases. The project’s first phase involves developing two districts: Mayar and Thoraya.

    The first district, Mayar, consists of 132 mansions. The four-storey mansions will be located within a gated community featuring a central park and walking trails.

    The second district, Thoraya, features 184 townhouses. It will include gardens, play areas, a gym and other associated facilities.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15993317/main.jpg
    Yasir Iqbal
  • Jordan begins prequalification for Amman water project

    16 March 2026

    Jordan’s Ministry of Investment has issued a request for qualifications (RFQ) for a non-revenue water (NRW) reduction project in the southern and southeastern areas of Amman.

    The project will be delivered under a public-private partnership (PPP) model using a design, build, finance, operate and maintain structure. It aims to reduce water losses and improve the efficiency of water distribution networks in the targeted areas.

    The initiative is being led by the Ministry of Investment through its PPP unit in collaboration with the Ministry of Water & Irrigation, the Water Authority of Jordan and Miyahuna.

    The procurement is expected to attract international water operators, engineering contractors and infrastructure investors with experience in NRW reduction programmes.

    The bid submission deadline is 23 April.

    Jordan has prioritised reducing NRW as part of efforts to improve the efficiency of its water sector. The country is among the most water-scarce in the world, and losses from distribution networks are estimated to account for about 45% of water supplied.

    NRW reduction programmes typically involve measures such as network rehabilitation, leak detection, pressure management and improved metering to reduce physical and commercial losses across water systems.

    Jordan is also advancing its $6bn Aqaba-Amman water desalination and conveyance project that aims to meet about 40% of Jordan’s municipal water demand by 2040.

    As MEED recently reported, the project is nearing financial close. Once complete, it will supply about 300 million cubic metres of potable water a year from the Red Sea to Amman and other regions.

    In February, the Water Authority of Jordan signed a four-year performance-based management contract with France’s Veolia to support water and wastewater services in the country’s northern governorates.

    Under the contract, Veolia will provide operations, maintenance and management services to Yarmouk Water Company, the public utility responsible for water supply and wastewater services in the region.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15993071/main.jpg
    Mark Dowdall