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Regional conflict eroding investment openings, Saudis warn

Khalid Al-Falih Saudi Arabia’s investment minister regional conflict Future Investment Initiative Reuters/Hamad I Mohammed
Saudi Arabia's minister of investment Khalid Al-Falih told the Future Investment Initiative in Riyadh that his country was 'navigating these geopolitical and macroeconomic challenges extremely well'
  • Conflict ‘hurting growth prospects’
  • Economy ‘navigating challenges well’
  • GCC ‘a bright spot in the region’

More than a year of regional conflict is eroding investment opportunities across the Middle East, Saudi officials admitted on Tuesday, though they sought to downplay the impact of regional tensions

Speaking at the Future Investment Initiative (FII) global investor conference in Riyadh days after Israel fired missiles at Iran, the officials said that the kingdom, the world’s largest oil exporter, has been only marginally impacted by the year of conflict as it pushes on with its Vision 2030 development plan

But they warned that escalating unrest is undermining growth prospects in the region.

Muhammad Al Jasser, chairman of the Saudi-led Islamic Development Bank (IDB) said: “The GCC as a whole is a bright spot in the region and global economy.”

Howeve, Al Jasser conceded that “there is a lot of intra-regional trade that has been disrupted significantly, so it has a lot of effect.”

He pointed out that the average Mena region GDP is now projected to grow at 4 percent, up from 2.1 percent previously.  

“We are very open economies in the GCC and trade with China is the largest, so it’s not a [GCC] issue. But the potential that was sitting waiting to be cultivated is evaporating with all these conflicts and this level of uncertainty,” Al Jasser said.

Al Jasser said the IDB, which has 57 country members, is one mechanism Saudi Arabia was using to encourage economic growth in struggling areas of the Islamic world. 

The bank is going to close 2024 by lending $5 billion for member countries in Africa, Central Asia and Mena, three times the amount the bank lent in 2020. “We are really gearing up to support those member countries,” Al Jasser said. 

Saudi Arabia’s finance minister Mohammed bin Abdullah Al-Jadaan said on Monday that the kingdom has provided at least $41 billion in funding for low-income sub-Saharan countries in Africa

Delegates gather at the Future Investment Initiative in Riyadh, Saudi Arabia. Photo: Reuters/Hamad I Mohammed

The FII forum has brought together global finance leaders, tech entrepreneurs and politicians.

In the shadow of escalating Iran-Israel conflict and a US election on November 5 that could return former president Donald Trump to power, global financiers were bullish about the US economy as a driver of global economic growth.

But they warned that fears of embedded inflation might put limits on Fed rate cuts. “A lot of roads do lead to the US at the moment,” Jane Fraser, CEO of Citi, told the forum.  

The Saudi economy is expected to rebound after an 0.8 percent contraction in GDP in 2023, caused by Opec+ oil output cuts, with a 1.5 percent increase this year and 4.6 percent in 2025, the International Monetary Fund said last week. 

Saudi Arabia’s investment minister Khalid Al-Falih said, referring to the regional conflict: “Obviously the headwinds will reflect in the economy, but thanks to the Vision 2030, the tailwinds are much stronger and the economy is navigating these geopolitical and macroeconomic challenges extremely well.” 

Mehmet Şimşek, Turkey’s minister of treasury and finance, said he was “concerned about the risk of escalation of ongoing conflicts, even though I think risk is small, but not completely ignorable.”