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
  • Bidders get more time for Jebel Ali sewage EPC contract

    29 April 2026

     

    Dubai Municipality has extended the deadline for contractors to submit bids for a contract covering the expansion of the Jebel Ali sewage treatment plant (STP) phases one and two.

    Contractors now have until June to submit offers, a source told MEED. Bidding had been expected to close on 30 April.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cubic metres a day (cm/d), with the expansion estimated to cost $300m.

    The scope includes the design, construction and commissioning of infrastructure and systems required to support the increased capacity.

    Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

    The main element of the expansion involves modifications to the secondary treatment process at Jebel Ali STP phase two.

    UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

    Future expansion

    It is understood that the project is part of long-term plans to treat about 1.05 million cm/d once all future phases are completed.

    According to sources, this includes a Jebel Ali-based build-operate-transfer (BOT) project to be developed under a public-private partnership (PPP) model.

    It is understood that the prequalification process for this will begin in the coming months.

    In February, MEED exclusively revealed that the municipality is preparing to tender the main construction package for the Warsan STP by the end of the year.

    As MEED understands, the Warsan STP had previously been planned as a PPP project.

    The main package will now be procured as an engineering, procurement and construction contract, a source said.

    The project involves the construction of a sewage treatment plant with a capacity of about 175,000 cm/d, including treatment units, sludge handling systems and associated infrastructure.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16608027/main.jpg
    Mark Dowdall
  • Kuwait Oil Company prepares to sign flowline contract

    29 April 2026

     

    State-owned upstream operator Kuwait Oil Company (KOC) is preparing to sign a contract worth KD174.2m ($565m) with Kuwait-based Heavy Engineering Industries & Shipbuilding Company (Heisco), according to industry sources.

    The contract is focused on developing flowlines and associated works in North Kuwait.

    One source said: “The contract is expected to be signed soon and everything associated with the contract award process is moving very smoothly.”

    Heisco announced in a stock exchange statement earlier this month that it had received a formal contract award letter for the project.

    While progress on the project is moving smoothly for now, the project may be impacted by fallout from the US and Israel’s war with Iran in the future.

    The project requires a large volume of pipelines to be transported into Kuwait, which would normally be shipped through the Strait of Hormuz.

    Heisco was the fourth-lowest bidder for the contract.

    Also this month, Heisco submitted the lowest bid for a project to upgrade part of the Mina Abdullah refinery’s export infrastructure.

    It submitted a bid of KD11,919,652 ($38.6m) for the project to implement renovation works on the artificial island that forms part of the port at the refinery.

    The only other bidder was Kuwait’s International Marine Construction Company (IMCC), which submitted a bid of KD12,480,113 ($40.4m).

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16599814/main.png
    Wil Crisp
  • Algerian-Indian team makes oil and gas discovery in Libya

    29 April 2026

    A consortium of state-owned companies from India and Algeria has made an oil and gas discovery in Libya’s Ghadames basin.

    The consortium comprises Algeria’s Sonatrach International Petroleum Exploration & Production (Sipex), Oil India and Indian Oil Corporation.

    The discovery was made in the Area 95/96 block, which is located near Libya’s border with Algeria.

    In a statement, India’s Ministry of Petroleum & Natural Gas said that the well was completed to a final depth of 8,440 feet and achieved production of 13 million cubic feet of gas a day and 327 barrels of condensate a day during testing.

    The hydrocarbons were extracted from the Awynat Wanin and Awyn Kaza formations.

    The ministry added: “The discovery reflects the growing global footprints of Indian energy companies, importance of strategic international alliances, and our commitment to strengthening national energy security through overseas assets acquisition by national oil companies.”

    The consortium won the exploration and production rights for the block, which covers an area of nearly 7,000 square kilometres, during Libya’s fourth oil and gas licensing round in December 2007.

    Stakeholders are expecting a surge in oil and gas project activity in Libya after the country’s rival legislative bodies recently approved a unified state budget for the first time in more than 13 years.

    The Central Bank of Libya confirmed on 11 April that both chambers had endorsed the budget, saying that it was a key step towards restoring financial stability after prolonged division.

    The budget is valued at LD190bn ($29.95bn), and LD12bn ($1.9bn) has been allocated to the NOC.

    An additional LD40bn ($6.3bn) has been allocated for “development projects”.

    Libya has stated that a joint committee has been formed to help prioritise development projects, and the projects have been listed in the budget.

    The development comes at a time when Libya’s oil and gas sector could be positioned to make windfall revenues as oil and gas prices remain high due to fallout from the US and Israel’s war with Iran.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16599813/main.png
    Wil Crisp
  • UAE to withdraw from Opec and Opec+ alliance

    28 April 2026

    The UAE has announced its decision to withdraw from Opec and the Opec+ alliance from 1 May.

    In a statement, the UAE Ministry of Energy said the move followed a “comprehensive review” of its production policy.

    “While near-term volatility, including disruptions in the Arabian Gulf and the Strait of Hormuz, continues to affect supply dynamics, underlying trends point to sustained growth in global energy demand over the medium to long term,” the statement, issued on 28 April, said.

    “This decision follows decades of constructive cooperation. The UAE joined Opec in 1967 through the Emirate of Abu Dhabi and continued its membership following the formation of the United Arab Emirates in 1971. Throughout this period, the UAE has played an active role in supporting global oil market stability and strengthening dialogue among producing nations.”

    The announcement was timed to coincide with an Opec ministerial meeting in Vienna and was communicated through state news agency Wam.

    Abu Dhabi National Oil Company (Adnoc) has set a target of raising production capacity to 5 million barrels a day (b/d) by 2027 – up from a current capacity of around 4.85 million b/d, though the country has been constrained to producing approximately 3.4 million b/d under Opec+ quota agreements.

    Membership of a quota-constrained group sits uneasily with that ambition. The non-oil economy now accounts for roughly 75% of the UAE’s GDP, reducing the political cost of rupture with the organisation.

    The Iran war wiped out 7.88 million b/d of Opec production in March, cutting group output 27% to 20.79 million b/d – the steepest supply collapse in the organisation’s recorded history, exceeding the Covid-19 demand shock of May 2020 and the disruptions of both the 1970s oil crisis and the 1991 Gulf War. Gulf producers have been struggling to route exports through the Strait of Hormuz amid Iranian threats and attacks on vessels, further straining the group’s cohesion.

    Against that backdrop, the UAE’s departure deals a significant blow to Opec and its de facto leader, Saudi Arabia, which has sought to project unity despite persistent internal disagreements over quotas and geopolitics.

    The US-Israeli war on Iran since late February has had a detrimental effect on a number of Gulf states, including the UAE.

    The UAE was targeted by thousands of Iranian ballistic missiles and drones, damaging strategic oil and gas facilities, denting Dubai’s appeal as a luxury tourism hotspot and slowing oil exports to a trickle.

    Whereas some Gulf states have urged dialogue with Iran, the UAE has maintained a more hawkish position. Analysts say that position is partially due to its reliance on the Strait of Hormuz for oil exports and the UAE’s unwillingness to see Iran cement itself as a regional power in the Gulf.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16596229/main.gif
    Indrajit Sen
  • NWC tenders package 14 of sewage treatment programme

    28 April 2026

     

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s National Water Company (NWC) has tendered a contract for the construction of 10 sewage treatment plants as part of the next phase of its long-term operations and maintenance (LTOM) sewage treatment programme.

    According to the original scope, the Eastern A Cluster (LTOM14) package will have a total treatment capacity of 184,440 cubic metres a day (cm/d) at an estimated cost of $180m.

    The bid submission deadline is 30 September.

    The tender follows recent contract awards for North Western A Cluster Sewage Treatment Plants Package 11 (LTOM11) and the Northern Cluster Sewage Treatment Plants Package 10 (LTOM10).

    MEED exclusively reported that a consortium comprising China’s Jiangsu United Water Technology, the UAE’s Prosus Energy and Saudi Arabia’s Armada Holding had been appointed as a contractor for each of these projects.

    Package 11 will have a combined capacity of about 440,000 cm/d at an estimated cost of about SR211m ($56.3m).

    Package 12 will have a combined treatment capacity of 337,800 cm/d at an estimated cost of about SR203m ($54.1m).

    In April, NWC also opened finanical bids for North Western B Cluster (LTOM12) of its sewage treatment programme.

    The contract covers the construction and upgrade of seven sewage treatment plants with a combined capacity of about 162,000 cm/d.

    MEED previously reported that the following companies had submitted proposals:

    • Alkhorayef Water & Power Technologies (Saudi Arabia)
    • Civil Works Company (Saudi Arabia)
    • Miahona (Saudi Arabia)
    • Beijing Enterprises Water Group – BEWG (Hong Kong)
    • Al-Yamama (Saudi Arabia)

    These bids are currently under evaluaton, with an award expected in the coming weeks, a source said.

    The tender for the North Western C Cluster (LTOM13) project had been put on hold, although it is understood that this is now likely to be the next package to be tendered.

    Under the original scope, this package covers the construction of 10 sewage treatment plants.

    In total, the LTOM programme comprises 19 packages split into two phases. This contract for LTOM10 was the first to be awarded under the second phase of NWC’s rehabilitation of sewage treatment plants programme.

    As MEED understands, there have been several discussions in recent months regarding changes in scope details and potential expansions. This involves potentially grouping some upcoming projects.

    NWC previously awarded $2.5bn-worth of contracts in the first phase. This comprises nine packages covering the treatment of 4.6 million cm/d of sewage water for the next 15 years. Phase two of the programme includes 10 packages covering 117 treatment plants.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16591851/main.jpg
    Mark Dowdall