MENA’s enormous trade potential is bolstered by a proactive trade shift towards fast-growing regions like Asia. This move is accompanied by a geopolitical reorientation in the same direction.
Executive summary
Oil-producing countries in the Middle East and North Africa (MENA) have grown steadily since the disastrous corona year of 2020 and will continue to do so, albeit at a more moderate pace. They still benefit from the elevated oil price, but are affected by the oil production cuts imposed by the OPEC+ cartel to prevent oil prices from falling. Energy-importing countries face tougher times as high inflation eases only gradually and continues to depress private consumption. The investment outlook is also brighter for fuel-exporting than for energy-importing countries, where fiscally weak governments have limited scope for capital expenditure and private investors are discouraged by political uncertainty and higher interest rates. If the oil market balances out as expected in 2024, at a price between USD 80 and USD 85 per barrel, this will lead to a more broad-based economic recovery. Overall we expect economic growth in MENA to slow to 1.8% this year and normalise to 3% in 2024.
MENA’s trade prospects are one of the best in the world, but this mainly offers opportunities for Asian trading partners. Western countries are increasingly disconnected from the region, with the exception of LNG imports for which MENA is becoming Europe’s alternative supplier since Russian gas is shunned due the war in Ukraine. For the Gulf states in particular, it is part of a national strategy to deepen trade ties with countries in emerging Asia and also Africa. These fast-growing economies will have an unrelenting demand for their fossil fuels for years to come, while they are also suitable partners in the greening and diversification drive of the GCC economies. Energy-importing countries in the region also benefit from the improved trading environment, for example via reduced geopolitical tensions, but to a lesser extent, as they continue to lean on slow-growing Europe as their main trading partner.
With the expected stabilisation of the oil price, macroeconomic imbalances are also improving. It allows most hydrocarbon-exporting countries to balance their budgets or even maintain surpluses. For energy-importing countries, a stable oil price around USD 80/85 per barrel means a resumption of the downtrend in fossil fuel imports, as the impact of expanding domestic renewable energy capacity takes hold. Nevertheless, oil price fluctuations pose a downside risk to the economic growth forecasts and country risk. The risks are acute in Egypt, Tunisia and Lebanon. Besides low economic growth rates, high inflation and high public debt levels, they have insufficient liquidity to absorb new external shocks.
Key points:
- We forecast a normalisation of economic growth to around 3% in 2024, based on the central tenet that the oil price balances out between USD 80-85.
- Inflation is easing only gradually in energy-importing countries and continues to depress private consumption. The vulnerability of Tunisia, Morocco, Egypt and Lebanon to currency depreciation remains a risk in this regard.
- The investment outlook is the brightest in oil-producing countries, with Saudi Arabia and the UAE leading the way. Ample oil-related liquidity, coupled with a balanced approach between nurturing their traditional hydrocarbon industries and making their economies greener and more diverse, offers a range of opportunities.
- MENA’s enormous trade potential is bolstered by a proactive trade shift towards fast-growing regions like Asia. This move is accompanied by a geopolitical reorientation in the same direction.
- Payment risks are the highest in Egypt, Tunisia and Lebanon. Lack of political commitment to solve balance of payment issues has affected the availability of hard currency there.
Niels de Hoog, senior economist
niels.dehoog@atradius.com
+31 20 553 2407
