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World Bank Slashes Growth Forecasts for MENA Region amid Global Uncertainty

World Bank President Ajay Banga speaks during the Spring Meetings in Washington (AFP).
World Bank President Ajay Banga speaks during the Spring Meetings in Washington (AFP).
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World Bank Slashes Growth Forecasts for MENA Region amid Global Uncertainty

World Bank President Ajay Banga speaks during the Spring Meetings in Washington (AFP).
World Bank President Ajay Banga speaks during the Spring Meetings in Washington (AFP).

The World Bank has sharply downgraded its growth projections for the Middle East and North Africa (MENA) region, cutting its forecasts for 2025 and 2026 to 2.6% and 3.7%, respectively.

It marked the second revision this year, down from January’s estimates of 3.4% and 4.1%, and significantly below the 3.8% growth previously expected for 2024, as published last October.

The revised outlook reflects the anticipated impact of a slowing global economy, driven by ongoing US tariff measures and retaliatory responses.

The International Monetary Fund (IMF) also echoed similar concerns earlier this week, projecting growth in the region at 2.6% for 2024 and 3.4% for 2025 - both reduced by nearly one percentage point from earlier forecasts.

In its latest MENA Economic Update, titled, “Shifting Gears: The Private Sector as an Engine of Growth in the Middle East and North Africa”, released during the World Bank and IMF Spring Meetings in Washington, the Bank highlighted that ongoing conflict, climate shocks, oil price volatility, and shifting geopolitical dynamics are compounding the region’s economic uncertainty. These risks are further amplified by indirect effects from global interest rate fluctuations and inflation trends.

The report noted that the MENA region expanded by a modest 1.9% in 2024 - slightly below earlier projections - while recovery in oil-importing countries is expected to be driven by increased consumption, aided by easing inflation. However, uncertainty remains high for agricultural recovery due to climate-related volatility.

Inflation Pressures

The World Bank observed that inflationary pressures in MENA moderated throughout 2024, in line with global trends. However, it cautioned that uncertainties around trade policy could rekindle inflation. Inflation is estimated at 2.2% in 2024, with a slight uptick to 2.4% in 2025, before easing again to 2.3% in 2026.

GCC Countries Show Resilience

For the Gulf Cooperation Council (GCC) countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE - the World Bank projects real GDP growth to rise to 3.2% in 2025 and 4.5% in 2026. This follows a downward revision for 2024 from 4.1%, although 2025’s forecast was slightly raised from 4.4%.

Growth is expected to be buoyed by a gradual rebound in oil production and continued economic diversification efforts, especially in Saudi Arabia, the UAE, Oman, and Qatar. The easing of oil output cuts by OPEC+ is also likely to support economic activity in these oil-exporting nations.

Inflation across GCC states is forecast to reach 2.4% in 2025, up from 2% in previous projections, before dipping to 2.3% in 2026. However, risks persist, particularly due to oil price volatility, potential trade disruptions, and broader global economic uncertainties. The report stresses the need for ongoing investment in human capital and infrastructure to enhance economic resilience.

Role of Private Sector

The report emphasizes the vital role of the private sector in driving sustainable growth across MENA. It argues that vibrant private enterprises are essential for job creation and innovation, yet productivity growth across the region has stagnated.

The Bank highlights that few firms invest in innovation or compete at a global level, while a large informal economy and limited female participation hamper broader progress.

Osman Dione, the World Bank’s Vice President for MENA, noted that the region continues to suffer from underutilized human capital and the exclusion of women from the labor market.

Governments are urged to play a facilitative role by enhancing market competition, improving business environments, and investing in infrastructure and data systems to support enterprise development. Roberta Gatti, the Bank’s Chief Economist for MENA, said: “A dynamic private sector is crucial for unlocking sustainable growth and prosperity in the region.”

The report concludes that a brighter future for MENA’s private sector is within reach if governments rethink their role, tap into untapped talent, and encourage firms to build internal capabilities and adopt stronger management practices. Unlocking this potential could substantially accelerate the region’s economic trajectory.

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Business

IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.

Business

Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.

Business

Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.