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World Bank Chief to Asharq Al-Awsat: No One Can Gauge Fallout of the Regional Escalation

World Bank President Ajay Banga visits the Geyushi bus manufacturing factory to review projects funded by the lender and assess how economic reforms are translating into job creation, in the 10th of Ramadan suburb of Cairo, Egypt, March 3, 2026. (Reuters)
World Bank President Ajay Banga visits the Geyushi bus manufacturing factory to review projects funded by the lender and assess how economic reforms are translating into job creation, in the 10th of Ramadan suburb of Cairo, Egypt, March 3, 2026. (Reuters)
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World Bank Chief to Asharq Al-Awsat: No One Can Gauge Fallout of the Regional Escalation

World Bank President Ajay Banga visits the Geyushi bus manufacturing factory to review projects funded by the lender and assess how economic reforms are translating into job creation, in the 10th of Ramadan suburb of Cairo, Egypt, March 3, 2026. (Reuters)
World Bank President Ajay Banga visits the Geyushi bus manufacturing factory to review projects funded by the lender and assess how economic reforms are translating into job creation, in the 10th of Ramadan suburb of Cairo, Egypt, March 3, 2026. (Reuters)

Rising geopolitical tensions are clouding the outlook for growth, inflation and capital flows across the Middle East, raising questions about the region’s ability to absorb fresh shocks.

Instability is not good for any region, World Bank President Ajay Banga told Asharq Al-Awsat, saying the scale of the fallout hinges on one factor: how long this escalation continues.

Banga was speaking on Tuesday on the sidelines of a visit to a factory in 10th of Ramadan City, northeast of Cairo.

He was responding to questions by Asharq Al-Awsat about the impact of the current escalation, the risk of disruption to the Strait of Hormuz, the possibility of oil prices topping $100 a barrel, and the implications for global growth, inflation and capital flows to emerging markets in 2026.

The answers, he said, are interlinked. The duration of the disruption will determine the depth of the economic impact.

Egypt offers a case in point. In recent years, it has navigated successive waves of uncertainty, from the COVID-19 pandemic to global volatility and, more recently, pressures linked to Suez Canal revenues, said Banga.

It is not hard to imagine the scale of challenges that creates for economic development, he added, pointing to strains on public finances, the currency and inflation in an unsettled global environment.

Fears are mounting that widening tensions in the Middle East could rattle energy markets and global supply chains. A sustained surge in oil prices would feed directly into higher global inflation, leaving central banks balancing price stability against growth.

At the same time, tighter global financial conditions could slow capital flows to emerging markets that depend, to varying degrees, on external financing and foreign investment.

On the short and medium term, Banga suggested the damage could be contained if instability proves short-lived.

Prolonged tensions, however, would amplify the pressure, he warned. The World Bank’s approach is to frame its outlook around time-based scenarios rather than issue numerical forecasts amid uncertainty.

Regarding Egypt, Banga said the World Bank continues to work with the government through a broad package of programs that extends beyond financing to support business and governance reforms and strengthen the private sector.

The cooperation spans physical infrastructure and investment in human capital to help generate sustainable jobs.

During his Cairo visit, Banga toured a Social Housing Project in 10th of Ramadan City and electric bus manufacturing lines. He described the housing project as among the largest globally in ambition and scale, noting that many beneficiaries are first-time buyers under 40.

Key lessons, he said, include government ambition, building a mortgage market and promoting financial inclusion - pillars he sees as essential to empowering young people and expanding home ownership.

More broadly, Banga linked infrastructure investment in housing, transport and energy to bolstering emerging economies against external shocks. Diversifying growth and backing sectors such as agriculture, tourism and manufacturing can help cushion volatility in energy markets and global trade.

The World Bank’s message, as outlined by its president, is clear: instability carries risks, but forecasts must be tempered by uncertainty over timing.

Whether 2026 is shaped by a brief disruption or a prolonged crisis will depend on how long tensions persist. Until then, resilience, structural reform and a stronger private sector remain central to weathering the storm in Egypt and across the region, Banga said.

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Business

What Do Saudi SMEs Need to Grow?

What Do Saudi SMEs Need to Grow?
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What Do Saudi SMEs Need to Grow?

What Do Saudi SMEs Need to Grow?

Financing alone is no longer enough to propel Saudi Arabia’s small and medium-sized enterprises into their next phase of growth, as their needs increasingly extend to accessing markets and contracts, securing operating liquidity, reducing business costs and boosting productivity, competitiveness and their ability to expand.

Financing available to the sector has nevertheless continued to grow. Cumulative credit facilities extended to micro, small and medium-sized enterprises reached about SAR 467 billion ($124.5 billion) by the end of 2025, up 33% year on year.

At the same time, Saudi Arabia’s National Strategy for Entrepreneurship and SMEs is seeking to address challenges beyond the financing gap by improving access to markets, procurement and supply chains, reducing the cost of doing business and strengthening companies’ capacity for sustainable growth.

In the latest financing initiative, the Small and Medium Enterprises General Authority, known as Monsha’at, signed a cooperation agreement with STC Bank in September 2026 for a financing portfolio of up to SAR 5 billion ($1.33 billion) for micro, small and medium-sized enterprises.

The portfolio includes short-, medium- and long-term facilities covering working capital, operating needs, purchases of assets and equipment, and financing for contracts, projects and supply chains.

Businesses also require more than long-term financing. The Social Development Bank’s Working Capital product offers financing ranging from SAR 150,000 ($40,000) to SAR 10 million ($2.67 million), with repayment periods of up to 12 months, to cover day-to-day operating costs and strengthen cash-flow management.

The bank distinguishes between working-capital financing for operating costs and capital-expansion financing for assets and expansion.

From financing to growth

Rayan bin Ibrahim Alfayez, Monsha’at’s deputy governor for enterprise services, said the 13 initiatives under the National Strategy for Entrepreneurship and SMEs are designed to directly address priority challenges facing business growth and create a more efficient environment that supports expansion and sustainability while strengthening competitiveness in the coming period.

Alfayez explained that one initiative aimed at expanding opportunities for businesses focuses on empowering SMEs and startups in industrial cities and special economic zones. It seeks to help them capitalize on opportunities available in those areas and provide support and incentives suited to the nature of their businesses, supporting their growth and strengthening their presence in industrial and economic activities and value chains.

He added that the strategy also includes an initiative to increase SMEs’ share of procurement by large companies, broadening their access to opportunities and contracts, strengthening their participation in supply chains and helping build sustainable commercial relationships that support business growth and expansion.

Alfayez noted that another initiative aimed at reducing the cost of doing business addresses one of the challenges affecting enterprise growth by examining fees and requirements in coordination with the relevant authorities and developing mechanisms to support fees based on carefully considered criteria. The initiative is intended to ease the financial burdens associated with doing business and create a more favorable environment for companies’ growth and sustainability.

He said the initiatives work together to address a range of factors linked to business growth, from the operating environment to opportunities, markets and value chains, strengthening SMEs’ ability to grow and expand while increasing their competitiveness and contribution to the national economy.

Markets after financing

Financial and economic adviser Hussein Al-Attas told Asharq Al-Awsat that the increase in financing directed toward SMEs reflected clear progress in Saudi Arabia’s financing ecosystem, but the challenge was no longer financing alone. Rather, it was an enterprise’s ability to turn that financing into sustainable growth.

Al-Attas explained that an enterprise needs three interconnected elements: appropriate financing, access to markets, and operational and competitive capacity.

He said a company may secure financing, but in the next stage it needs contracts and sales opportunities that allow it to increase revenue, alongside managerial and technological development to boost productivity and the ability to manage cash flows and expand without allowing growth to become a financial burden.

Al-Attas added that access to markets and contracts represents the link most closely associated with an enterprise’s transition from survival to growth. Financing gives a business the capacity to act, while contracts and markets turn that capacity into revenue and cash flow.

He further stated that greater SME participation in government procurement and the supply chains of large companies, along with opening export channels, could have a direct impact on their ability to expand, alongside efforts to reduce the cost of doing business and raise productivity.

The next phase requires moving from the concept of “financing the enterprise” to “financing the enterprise’s growth,” he underlined, meaning that financing should be linked to markets, contracts, technology, productivity and expansion.

Strategy broadens its scope

The focus on markets forms part of the wider National Strategy for Entrepreneurship and SMEs, which includes 13 initiatives addressing sector challenges in access to markets and opportunities, financing, the business environment, innovation, data and expansion.

The strategy also aims to raise SMEs’ contribution to gross domestic product to 35% by 2030 and create more than 500,000 direct and indirect jobs.

Some initiatives seek to turn market access from a broad objective into direct contracting opportunities by qualifying enterprises and connecting them with the supply chains of large companies and projects.

This approach is reflected in Monsha’at’s Jadeer service, which aims to improve businesses’ readiness, qualify them to enter supply chains and enable them to benefit from procurement opportunities.

The equation for SME growth therefore does not stop at increasing available financing. It also depends on businesses’ ability to use that financing first to fund operations, then gain access to demand and contracts, improve productivity and reduce costs before moving into expansion and investment.

This reflects a shift from addressing the financing gap to addressing the growth gap: liquidity gives an enterprise the ability to continue operating and move forward, while access to markets and operational efficiency determine its ability to turn financing into revenue and sustainable growth.

Business

OECD Lifts 2026 Global Growth Forecast to 2.9% Despite Mideast War

OECD Lifts 2026 Global Growth Forecast to 2.9% Despite Mideast War
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OECD Lifts 2026 Global Growth Forecast to 2.9% Despite Mideast War

OECD Lifts 2026 Global Growth Forecast to 2.9% Despite Mideast War

Economic growth has remained "resilient" in many countries despite the war in the Middle East, the OECD said Wednesday as it slightly raised its GDP forecasts for the year.

Global economic growth is now seen at 2.9 percent, a 0.1-point increase from estimates in June by the Paris-based group of 38 industrialized countries.

Even though energy prices have soared since the United States and Israel launched strikes against Iran last February, the OECD noted that "broader financial conditions remain supportive", as seen in rising equity markets and continued access to credit.

"Sizeable oil inventories, additional supply from outside the Gulf economies and discretionary government support measures all helped to cushion the impact on the global economy," the group said in its quarterly update.

It also cited the massive investments in artificial intelligence and the resulting boost to production and trade, which could result in "stronger growth than projected".

But global growth has slowed sharply from the 3.4 percent chalked up last year, and the group trimmed its 2027 growth forecast by 0.1 percentage point, to three percent.

Governments have started raising interest rates to contain inflation pressures stemming from high oil and gas prices, which have sent diesel and other fuel costs to highs not seen in years.

That has sent government bond yields to levels not seen since the global financial crisis of 2007-2008, pushing up borrowing costs even as countries worldwide grapple with high debt and deficits.

"Rising bond yields underline more than ever the need for enhanced efforts to contain and reallocate government spending, improve public-sector efficiency and strengthen revenues to ensure longer-term debt sustainability and maintain the ability of governments to react to significant shocks," the OECD said.

It also warned of prolonged inflation if the Mideast war continues, with price increases in the G20 group of developing and emerging economies seen at 4.1 percent overall this year.

"Other significant downside risks include potential weather-related supply shocks, including a very strong El Nino, that adversely impact agricultural production and add to rising food price pressures," AFP quoted it as saying.

For the United States, it expects GDP to expand 2.2 percent this year, up 0.2 points from its June forecast, while the eurozone could see growth of one percent, also up 0.2 points.

Japan's growth is now seen at 0.8 percent, up 0.2 points, while the forecast for the Chinese economy, the world's second largest, was held steady at 4.5 percent.

For the G20, the OECD sees growth of 3.1 percent.

Business

IMF: Egypt Absorbs Economic Shocks of War

A man walks past a traditional sidewalk kiosk in Cairo on September 18, 2026 (AFP)
A man walks past a traditional sidewalk kiosk in Cairo on September 18, 2026 (AFP)
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IMF: Egypt Absorbs Economic Shocks of War

A man walks past a traditional sidewalk kiosk in Cairo on September 18, 2026 (AFP)
A man walks past a traditional sidewalk kiosk in Cairo on September 18, 2026 (AFP)

Egypt has weathered one of the region's largest recent economic shocks without a broader downturn, benefiting from improved international reserves, exchange rate flexibility, and a swift policy response.

However, the economy’s ability to remain resilient will continue to depend on addressing chronic weaknesses, including high public debt, large financing needs, the banking sector’s elevated exposure to the government, and the expanding role of the state in economic activity.

The findings were published in a country focus prepared by Amine Mati, IMF’s mission chief for Egypt, and Yevgeniya Korniyenko, a senior economist at the IMF’s Middle East and Central Asia Department.

Entitled ‘Resilience Under Pressure: Egypt's Economy Defied Expectations,’ the two economists found that policy reforms undertaken under the IMF-supported program had strengthened growth, put inflation on a downward path, and helped rebuild international reserves and improve banks’ foreign asset positions.

Also, the IMF’s latest assessments indicate that gross financing needs are expected to remain around 40% of GDP in the near term and decline only gradually to below 30% by 2030. More broadly, the state footprint in the economy remains excessively high.

Economy Absorbs Shocks

According to the IMF, Egypt entered the latest period of regional conflict in a stronger macroeconomic position than during previous episodes of external stress.

The Fund said policy reforms undertaken under its-supported program had strengthened growth, put inflation on a downward path, and helped rebuild international reserves and improve banks’ foreign asset positions.

Also, the Fund noted that financial markets reacted sharply.

“Nonresident holdings of local-currency government debt fell from $39.1 billion in February to $22.2 billion in early April, while the Egyptian pound depreciated by about 14–17%,” it wrote.

As pressures eased, portfolio inflows resumed, non-resident holdings returned to near pre-conflict levels, and the pound recovered much of its initial losses.

The IMF linked this performance to the fact that exchange rate flexibility absorbed external pressures, while energy price adjustments in the wake of higher international oil prices, spending restraint, and expanded targeted support helped preserve policy discipline.

Non-Stop Growth

In its country focus, the IMF found that the financial shock in Egypt did not spill over into a broader economic downturn.

“Growth remained strong, reaching 5.0% in the third quarter of FY2025/26, while tourism stayed resilient, remittances surged to record highs, and Suez Canal activity continued its gradual recovery following some temporary disruption amid the regional turmoil,” it wrote.

Also, fiscal pressures were contained through revenue mobilization and expenditure restraint.

As for inflation, it rose in response to the currency depreciation and energy price adjustments, but the increase proved less severe than expected, although the path back to the inflation target was pushed back by a year.

Crucially, the IMF said, international reserves remained comfortably above adequate levels despite initial capital outflows, reflecting exchange rate flexibility in absorbing external pressures—a key difference from past episodes.

Gross Financing Needs Still High

The latest shock demonstrated Egypt’s improved resilience, but significant vulnerabilities remain, the IMF found.

It said public debt and gross financing needs are still high, financing relies heavily on short maturities, and banks’ exposure to the government remains elevated.

The fund warned that these vulnerabilities—particularly amid heightened global uncertainty—leave Egypt exposed to shifts in global financing conditions and renewed external shocks, while reinforcing the sovereign-bank nexus and increasing the risk of fiscal dominance.

Large government financing needs can also crowd out private sector credit and investment, it said.

The report found that reducing public debt and high gross financing needs will require stronger debt management, with a shift toward longer-term, market-based financing, a broader investor base, and deeper domestic debt markets to reduce refinancing risks and strengthen debt sustainability.

Most importantly, it said, “more decisive implementation of the State Ownership Policy and divestment program, stronger governance of state-owned enterprises, and greater competition will be critical to reducing the state’s footprint and creating the conditions for stronger private sector led growth.”