The economic challenges and opportunities for MENA, according to experts at #SpecialMeeting24

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Kate Whiting, Senior Writer, Forum Agenda

• The Middle East and North Africa (MENA) region was in the spotlight at the World Economic Forum’s Special Meeting on Global Collaboration, Growth and Energy for Development held in Saudi Arabia last month.
• Experts discussed the prospects for economic growth and stability, as well as the challenges facing the region.
• Here are some key takeaways from a session on the region’s economy.

“Peace and stability are indispensable for economic growth, but if we wait for peace and stability in our part of the world, we could be waiting for a long time.”

So said Ahmed Galal Ismail, CEO of UAE-based Majid Al Futtaim, at the World Economic Forum’s Special Meeting on Global Collaboration, Growth, and Energy for Development in Saudi Arabia.

He was speaking at a session on Economic Perspectives for the Middle East and North Africa, which included Jordan’s Minister of Finance, Mohamad Al-Ississ; Saudi Arabia’s Minister of State for Foreign Affairs, Member of the Council of Ministers and Climate Envoy, Adel bin Ahmed Al Jubeir; Director-General, Royal United Services Institute for Defence and Security Studies, Karin von Hippel; and Jihad Azour, Director, Middle East and Central Asia Department, International Monetary Fund (IMF).

Growth in the MENA region is expected to “remain subdued” this year, according to the IMF’s April 2024 Regional Economic Outlook – but will improve moderately to 2.7%, up from 1.9% in 2023.

In 2025, the IMF projects growth to reach 4.2%, which assumes that the impact of the Israel-Gaza conflict, Red Sea shipping disruptions and oil production cuts will “fade gradually”.

The IMF’s growth outlook for the MENA region in 2024.Image: IMF

Here are some key takeaways on economic challenges and opportunities, from building resilience to boosting regional integration for growth.

Resilience in the MENA region

Despite the ongoing conflict, which has affected the lives of many, the region has proved to be resilient, said von Hippel.

“A positive thing to say about this region is the resilience in times of uncertainty … There’s been a conflict in several countries in this region for several decades now. And yet countries are investing and they’re thinking through new approaches. So I think that the resilience is actually very important.”

Azour summed up the uncertain economic landscape for the region as “a tale of two cities”.

“It’s a year of shocks and at the same time, a year of resilience. A year of recovery but also a year of very slow growth. A year of high inflation in certain countries, but a year of very well-managed inflation.

“You can read the situation in different ways, which makes it very challenging to set the same set of policy recommendations for countries,” he said.

“But first, in a time of resilience, you need to increase your buffers. And this is something that works for all countries. In times of shocks, you need to make sure that you have the right safeguards, especially at the social level.”

Al-Ississ explained that he had been a minister of finance in Jordan through COVID-19, the Russian invasion of Ukraine, and now the Gaza crisis – and the country has been “resilient against all odds”.

“Resilience is the foundation upon which you want to build growth and job creation … We still need more participation for women in our workforce. We have to turn all the education that we’ve invested in into better lives for our households. And none of that will happen if disruption of long-term plans continues to be the firefighting mode we function in as decision-makers.”

He agreed with Azour that the top priority is to invest in enhancing your buffers “so that you can increase your resilience, for when black swans, which have become the norm, unfold…

“The reality is decision-makers cannot expect the normal way of doing business to be the way forward.

“In Jordan, we have invested in enhancing our resilience, which has paid off in protecting and shielding our middle class from the global ramifications of what the whole world witnessed.”

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You must invest in building resilience before crises hit, not at the height of crisis … I think it would be fatal to wait until you need to reform.”— Mohamad Al-Ississ, Minister of Finance, Jordan

Economic integration to bridge the gap

“Conflict doesn’t serve anything,” said Al-Jubeir. “It undercuts the ability to try to integrate the region and to unleash the economic potential of this region.”

The MENA region has a young population, vast natural resources, a large capital base and a strategic geographic location, he said, which can lead to growth.

“All the elements for success and prosperity exist – and our objective is to link the region with the world and put the resources of the region together so we can create synergies that have a positive impact on all the inhabitants of the region.”

The Gulf Cooperation Council (GCC), comprised of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, has already achieved such integration, he added.

“What we have seen is numbers going through the roof with regards to traffic, with regards to investment, with regards to trade. Our hope is that we can expand this to include the rest of them in the region and hopefully beyond.”

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Our objective is to try to put an end to these tensions so we can focus on the things that matter: Economic development and prosperity.”— Adel bin Ahmed Al Jubeir, Minister of State for Foreign Affairs, Member of the Council of Ministers and Climate Envoy, Saudi Arabia

The MENA region could unlock almost $1 trillion in additional regional GDP through greater economic integration, according to a report from Majid Al Futtaim and McKinsey.

CEO of Majid Al Futtaim Ahmed Galal Ismail said if the region’s Big Three economies, Saudi Arabia, the UAE and Egypt, were a trading bloc today, “they would be the fastest growing trading bloc in the world”.

But the challenge post-COVID is that it’s a two-speed region and intra-regional trade within MENA is “anaemic”.

“One way to bridge the gap is … more economic integration, more free movement of goods, people, talents, data, capital, oil.”

He said current disruptions not only expose the lack of connectedness but also provide “an opportunity to pause and reflect that actually by creating more opportunities for economic integration, we would create the resilience that is required to deal with the next crisis”.

“But most importantly, we would start bridging that deficit of hope … Unlocking $1 trillion would be transformative for the people and societies of our part of the world. From a private-sector point of view, we need to deal with the current short-term challenges, but we must not lose hope that this region is on the brink of potential, a new golden economic age. And we need to invest in the long term.”

Technology as a driver for growth

Azour said new transformative sectors, such as artificial intelligence (AI) and climate technology, are attracting investments and creating opportunities for growth.

“Accelerate structural reforms because they will enable you to invest in human capital, invest in access to finance, invest in access to technology. Those are important issues.”

Saudi Arabia’s Vision 2030 is transforming the country, to reduce reliance on oil production and increase sustainability.

“It’s opening up new sectors for investment, whether it’s mining, artificial intelligence, renewable energy, tourism, entertainment, recreation,” said Al-Jubeir.

“We want to build a country that is diversified, inclusive, energetic, based on technology, that competes in the world and that is part of the global trading system.”

We are at the start of a cognitive revolution with AI, said Ahmed Galal Ismail, but most STEM graduates from the region look to further their career outside the region.

Policy and greater dialogue can help to encourage investment in technology that helps to retain talent. He said the UAE, Jordan and Egypt had discussed how to attract investment in technology, analytics and AI.

“In doing so, we were able to generate great ideas about incentives, about policy reform and on the back of that, we’re now seeing global companies setting up their significant centres of excellence for data and analytics and AI in Amman, Jordan, Cairo, Egypt and elsewhere.

“For the first time ever, we’ve seen a global tech company leading AI invest in a regional business – that happened a few days ago with Microsoft and G42. We need to amplify that, and we need to make sure that these stories are receiving their fair share of air time.”

You can watch the full session here.