Following a strong performance in 2022, the MENA region will see growth weaken in 2023 in line with the overall global economic slowdown, as falling oil prices have an adverse effect on oil-exporting countries in the region.
Article continues below
Oil exporting countries, Saudi Arabia, UAE, Bahrain, Oman, Kuwait and Qatar, will experience a drop from 7.6% GDP growth in 2022 to just 1.4% this year, but growth will pick up thanks to the development of diversified, non-oil sectors, and a recovery in oil prices, said Niels de Hoog, Senior Economist, Atradius, a global trade insurance leader.
Several supportive factors, including a likely stabilisation in oil prices, should drive a rebound from 2024 – although oil price swings and climate change present significant risks, said Atradius its 2023 Regional Economic Outlook report.
Oil importing countries - Morocco, Jordan, Lebanon, Tunisia and Egypt – will grow more slowly than the oil exporters, as they struggle with high inflation and interest rates, low government spending and the influence of overall global economic weakness.
"Oil price fluctuations meant the MENA region could not maintain the 5%+ growth rate in GDP seen in 2021 and 2022," said Rupa Jagannathan, Managing Director, Middle East, Atradius.
"However, while growth will be weak this year, a rebound is likely in 2024, fuelled by investments and economic diversification, as well as stronger trade partnerships with Asian markets and other African economies."
Assuming oil prices remain elevated, growth among Gulf Cooperation Council (GCC) countries in areas other than oil will experience only a mild slowdown, with governments using petrodollars to support household consumption and investment projects.
Saudi Arabia and UAE, in particular, have recorded impressive growth in real gross fixed investment, with a focus on balancing the funding of fossil fuels with meeting sustainability targets and diversifying their economies.
Meanwhile, energy importing countries face a more subdued outlook as inflationary pressures remain, worsened by currency depreciation and monetary policy missteps. Any rise in the oil price could scupper the recovery process.
All MENA countries, especially those in the GCC, will benefit from trade and strong relations with key Asian markets, particularly China and India.
Apart from the energy trade, GCC countries are performing well on non-fuel exports, mainly chemicals, manufactured goods and machinery, along with services, in line with strategic decisions to diversify away from hydrocarbon trade.
Oil-importing countries' main export partner is a slower-growing Europe, meaning it will benefit to a relatively lesser extent from trade.
With an increased focus on sustainability, a number of MENA markets are turning to African countries for importing critical metals, which serve as inputs for renewable energy technologies. China remains a major supplier of solar panels and other technologies supporting the region's energy transition.
The global energy transition will lead to a rise in demand for natural gas as a transition fuel from places such as China and Europe, while oil exports will see a gradual decline. To capitalise on the opportunity, gas producers like Qatar are investing in expanding capacity. ■