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World Bank Expects MENA GDP to Rise to 2.7% in 2024 Amid Heightened Uncertainty

MENA’s gross domestic product (GDP) is forecast to rise to 2.7% in 2024, which is a tepid increase from 1.9% in 2023. (Reuters)
MENA’s gross domestic product (GDP) is forecast to rise to 2.7% in 2024, which is a tepid increase from 1.9% in 2023. (Reuters)
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World Bank Expects MENA GDP to Rise to 2.7% in 2024 Amid Heightened Uncertainty

MENA’s gross domestic product (GDP) is forecast to rise to 2.7% in 2024, which is a tepid increase from 1.9% in 2023. (Reuters)
MENA’s gross domestic product (GDP) is forecast to rise to 2.7% in 2024, which is a tepid increase from 1.9% in 2023. (Reuters)

The World Bank’s new Middle East and North Africa Economic Update, entitled “Conflict and Debt in the Middle East and North Africa”, shows that lackluster growth, rising indebtedness and heightened uncertainty due to the conflict in the Middle East are impacting economies across the region.

According to the report, MENA economies are expected to return to low growth akin to the decade prior to the pandemic. MENA’s gross domestic product (GDP) is forecast to rise to 2.7% in 2024, which is a tepid increase from 1.9% in 2023.

As in 2023, oil importing and oil exporting countries are likely to grow at less disparate rates than 2022, when higher oil prices boosted growth in oil exporters.

For Gulf Cooperation Council (GCC) countries, the 2024 growth uptick reflects expectations of robust non-oil sector activity and fading out of oil production cuts towards the end of the year. GDP growth in almost all oil importing countries is expected to decelerate.

The report looks at the economic impact of the conflict in the Middle East on the region. Economic activity in Gaza has come to a near standstill. The GDP of the Gaza strip dropped by 86% in the last quarter of 2023. The West Bank has plunged into a recession, with simultaneous public and private sector crises. Recent World Bank reports go into further depth on damages to the Gaza Strip and catastrophic impacts on the people of Gaza.

The economic impact of the conflict on the rest of the region has remained relatively contained, but uncertainty has increased. For example, the shipping industry has coped with shocks to maritime transport by rerouting vessels away from the Red Sea, but any prolonged disruptions to routes through the Suez Canal could increase commodity prices regionally and globally.

The report also looks at rising indebtedness in the MENA region. Between 2013 and 2019, the median debt-to-GDP ratio for MENA economies increased by more than 23 percentage points. The pandemic made things worse as declines in revenue, together with pandemic support spending, increased financing needs for many countries.

This rising indebtedness is heavily concentrated in oil-importing economies, which now have a debt-to-GDP ratio 50 percent higher than the global average of emerging markets and developing economies. Approaching 90 percent of GDP in 2023, oil-importing countries in MENA have a debt-to-GDP ratio almost three times higher than that of oil exporting countries in the region.

The report presents evidence that oil-importing countries in MENA have been unable to grow out of debt or inflate their debt away, making fiscal discipline essential to curb indebtedness. Critically, off-budget items which have played a large role in some MENA economies have been to the detriment of debt and fiscal transparency. The challenge for oil exporters is one of economic and fiscal-revenue diversification, given the structural change in global oil markets and the rising demand for renewable sources of energy. Overall, MENA economies need to undertake structural reforms, chief among them transparency, to unlock growth and forge a sustainable path ahead.

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Al-Rumayyan: PIF Investments in Local Content Exceed $157 Billion

Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)
Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)
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Al-Rumayyan: PIF Investments in Local Content Exceed $157 Billion

Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)
Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)

Yasir Al-Rumayyan, governor of Saudi Arabia’s Public Investment Fund (PIF), announced that spending by the sovereign fund’s programs, initiatives, and companies on local content reached 591 billion riyals ($157 billion) between 2020 and 2024.

He added that the fund’s private sector platform has created more than 190 investment opportunities worth over 40 billion riyals ($10 billion).

Speaking at the opening of the PIF Private Sector Forum on Monday in Riyadh, Al-Rumayyan said the fund is working closely with the private sector to deepen the impact of previous achievements and build an integrated economic system that drives sustainable growth through a comprehensive investment cycle methodology.

He described the forum as the largest platform of its kind for seizing partnership and collaboration opportunities with the private sector, highlighting the fund’s success in turning discussions into tangible projects.

Since 2023, the forum has attracted 25,000 participants from both public and private sectors and has witnessed the signing of over 140 agreements worth more than 15 billion riyals, he pointed out.

Al-Rumayyan emphasized that the meeting comes at a pivotal stage of the Kingdom’s economy, where competitiveness will reach higher levels, sectors and value chains will mature, and ambitions will be raised.

PIF Private Sector Forum aims to support the fund’s strategic initiative to engage the private sector, showcase commercial opportunities across PIF and its portfolio companies, highlight potential prospects for investors and suppliers, and enhance cooperation to strengthen the local economy.

Business

Pakistan’s Finance Minister to Asharq Al-Awsat: We Draw Inspiration from Saudi Arabia

The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)
The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)
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Pakistan’s Finance Minister to Asharq Al-Awsat: We Draw Inspiration from Saudi Arabia

The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)
The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)

Pakistani Finance Minister Muhammad Aurangzeb discussed the future of his country, which has frequently experienced a boom-and-bust cycle, saying Pakistan has relied on International Monetary Fund (IMF) programs due to the absence of structural reforms.

In an interview with Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Aurangzeb acknowledged that Pakistan has relied on IMF programs 24 times not as a coincidence, but rather as a result of the absence of structural reforms and follow-up.

He stressed the government has decided to "double its efforts" to stay on the reform path, no matter the challenges, affirming that Islamabad not only has a reform roadmap, but also draws inspiration from "Saudi Vision 2030" as a unique model of discipline and turning plans into reality.

Revolution of Numbers

Aurangzeb reviewed the dramatic transformation in macroeconomic indicators. After foreign exchange reserves covered only two weeks of imports, current policies have succeeded in raising them to two and a half months.

He also pointed out to the government's success in curbing inflation, which has fallen from a peak of 38 percent to 10.5 percent, while reducing the fiscal deficit to 5 percent after being around 8 percent.

Aurangzeb commented on the "financial stability" principle put forward by his Saudi counterpart, Mohammed Aljadaan, considering it the cornerstone that enabled Pakistan to regain its lost fiscal space.

He explained that the success in achieving primary surpluses and reducing the deficit was not merely academic figures, but rather transformed into solid "financial buffers" that saved the country.

The minister cited the vast difference in dealing with disasters. While Islamabad had to launch an urgent international appeal for assistance during the 2022 floods, the "fiscal space" and buffers it recently built enabled it to deal with wider climate disasters by relying on its own resources, without having to search "haphazardly" for urgent external aid, proving that macroeconomic stability is the first shield to protect economic sovereignty.

Privatization and Breaking the Stalemate of State-Owned Enterprises

Aurangzeb affirmed that the Pakistani Prime Minister adopts a clear vision that "the private sector is what leads the state."

He revealed the handover of 24 government institutions to the privatization committee, noting that the successful privatization of Pakistan International Airlines in December provided a "momentum" for the privatization of other firms.

Aurangzeb also revealed radical reforms in the tax system to raise it from 10 percent to 12 percent of GDP, with the adoption of a customs tariff system that reduces local protection to make Pakistani industry more competitive globally, in parallel with reducing the size of the federal government.

Partnership with Riyadh

As for the relationship with Saudi Arabia, Aurangzeb outlined the features of a historic transformation, stressing that Pakistan wants to move from "aid and loans" to "trade and investment."

He expressed his great admiration for "Vision 2030," not only as an ambition, but as a model that achieved its targets ahead of schedule.

He revealed a formal Pakistani request to benefit from Saudi "technical knowledge and administrative expertise" in implementing economic transformations, stressing that his country's need for this executive discipline and the Kingdom's ability to manage major transformations is no less important than the need for direct financing, to ensure the building of a resilient economy led by exports, not debts.

Business

Oil Drops 1% as US, Iran Pledge to Continue Talks

The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)
The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)
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Oil Drops 1% as US, Iran Pledge to Continue Talks

The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)
The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)

Oil prices fell 1% on Monday as immediate fears of a conflict in the Middle East eased after the US and Iran pledged to continue talks about Tehran's nuclear program over the weekend, calming investors anxious about supply disruptions.

Brent crude futures fell 67 cents, or 1%, to $67.38 a barrel on Monday by 0444 GMT, while US West Texas Intermediate crude was at $62.94 a barrel, down 61 cents, or 1%.

"With more talks on the horizon the immediate ‌fear of supply disruptions ‌in the Middle East has eased ‌quite ⁠a bit," IG ‌market analyst Tony Sycamore said.

Iran and the US pledged to continue the indirect nuclear talks following what both sides described as positive discussions on Friday in Oman despite differences. That allayed fears that failure to reach a deal might nudge the Middle East closer to war, as the US has positioned more military forces in the area.

Investors are also worried about possible disruptions to supply ⁠from Iran and other regional producers as exports equal to about a fifth of the world's ‌total oil consumption pass through the Strait of ‍Hormuz between Oman and Iran.

Both ‍benchmarks fell more than 2% last week on the easing tensions, their ‍first decline in seven weeks.

However, Iran's foreign minister said on Saturday Tehran will strike US bases in the Middle East if it is attacked by US forces, showing the threat of conflict is still alive.

"Volatility remains elevated as conflicting rhetoric persists. Any negative headlines could quickly reignite risk premiums in oil prices this week," said Priyanka Sachdeva, senior market analyst at ⁠Phillip Nova.

Investors are also continuing to grapple with efforts to curb Russian income from its oil exports for its war in Ukraine. The European Commission on Friday proposed a sweeping ban on any services that support Russia's seaborne crude oil exports.

Refiners in India, once the biggest buyer of Russia's seaborne crude, are avoiding purchases for delivery in April and are expected to stay away from such trades for longer, refining and trade sources said, which could help New Delhi seal a trade pact with Washington.

"Oil markets will remain sensitive to how broadly this pivot away from Russian crude unfolds, whether ‌India’s reduced purchases persist beyond April, and how quickly alternative flows can be brought online," Sachdeva said.