IMF lowers MENA growth forecast amid regional conflicts and oil cuts

The Middle East region’s economic growth is expected to slow to 2.1% in 2024, down from an earlier estimate of 2.7%, according to the International Monetary Fund’s (IMF) latest regional economic outlook (pdf). Next year’s growth forecast was also trimmed to 4%, driven by insufficient foreign direct investment amid regional wars and high debt levels in mid-income economies.

The IMF attributed the slowdown to regional conflicts, particularly the escalated tensions in Gaza, Lebanon, and Sudan, impacting stability and potentially creating “lasting economic losses,” according to the report — a projection echoed by IMF Mena and Central Asia director, Jihad Azour, in an interview with Bloomberg.

Some policy recs advise caution: States around the conflict zone, including Egypt, Jordan, and Iraq, “need to be protective to preserve their macroeconomic stability,” Azour said. However, “crucial structural reforms could face rising social discontent and political resistance, hindering policy execution and constraining growth.”

Oil cuts are also to blame: Oil production cuts imposed by Opec+ are also squeezing revenues for oil-reliant Mena economies, including Saudi Arabia, the UAE, and Iraq. The oil management alliance recently delayed a planned supply increase to December, citing weak demand from China and increased production elsewhere.

But the non-oil sector remains a bright spot: “Growth of the non-oil sector in the Gulf Cooperation Council has been resilient and has been driving the growth for the last couple of years,” Azour said.

The UAE is set to lead GCC growth in 2025, driven by an expected 4-5% growth in its non-oil economy thanks to the “effectiveness of the country’s economic policies,” Azour said separately, according to Wam. He highlighted investments in tech, renewables, and green initiatives as key growth drivers for the Emirates.

Less gloomy on the global front: The IMF revised downwards its forecast for global growth next year to 3.2%, a 0.1 percentage point downward revision from its July estimate, on the back of escalating geopolitical tensions and trade protectionism.

MARKETS THIS MORNING-

Asian markets are a sea of red amid an influx of earnings in the West and economic data from the region, which pushed Japan’s Nikkei down more than 2%. Over on Wall Street, futures indicate a better open after the Nasdaq and S&P 500 notched their worst days in nearly two months.

THE CLOSING BELL-

The DFM fell 0.3% yesterday on turnover of AED 528.1 mn. The index is up 13.1% YTD.

In the green: Takaful Emarat (+14.4%), National Industries Group Holding (+10.1%) and Al Ramz Corporation Investment and Development (+4.2%).

In the red: Emirates Investment Bank (-10%), Salik Company (-4.6%) and Ithmaar Holding (-2.4%).

Over on the ADX, the index remained flat on turnover of AED 1.5 bn. Meanwhile, Nasdaq Dubai closed down 0.7%.