Skip to content Skip to Search
Skip navigation

Mena growth to fall as GCC weakness exposed

Morocco's earthquake will contribute to a slump in Mena GDP growth Reuters
September's earthquake in Morocco has led to its GDP growth being downgraded, but rebuilding efforts are expected to increase growth in 2024
  • 2023 growth predictions down to 1.9%
  • GCC down to 1% from 7.3%
  • 2024 growth to be above 2015-19 average

Analysts have predicted a slump in growth for the Middle East and North Africa (Mena) for 2023, prompted by oil production cuts in the GCC and the impact of the Morocco earthquake in September.

Both the World Bank and BMI, formerly Fitch Solutions, said Mena growth is likely to fall to 1.9 percent this year, compared with 6 percent in 2022.

More pessimistic outlooks on oil production in Saudi Arabia and Kuwait, weaker-than-expected non-oil activity in Qatar and Bahrain, and the impact of the September 8 earthquake in Morocco all contributed to the decision.

The disaster in Morocco prompted BMI to cut the country’s GDP growth expectations for this year from 2.4 percent to 1.8 percent.

“We had always expected softer growth in Mena in the second half of 2023 but conditions will be even worse than we had thought,” said BMI analysts.

The downward revisions more than offset improved forecasts for Egypt, Jordan, the UAE, Iran and Israel.

GCC impact

The World Bank said the decline in growth is expected to be more pronounced in GCC oil-exporting countries, where real GDP growth is forecast at 1 percent in 2023, down from 7.3 percent in 2022. 

In developing oil-exporting countries, growth is forecast to decline more moderately from 4.3 percent to 2.4 percent. It signals the end of the bank’s “tale of two Menas” narrative from 2022, in which oil exporters were growing much faster than oil importers.

For per capita income, growth across Mena is forecast to decrease from 4.3 percent in 2022 to 0.4 percent in 2023.

By the end of 2023, only 8 of 15 economies in the region will have returned to pre-pandemic real GDP per capita levels, according to the World Bank.

“If the region grows slowly, how will the 300 million young people who will be knocking at the door of the labour market by 2050 find jobs with dignity?” asked Ferid Belhaj, World Bank vice president for Mena. 

“Without proper policy reforms, we could inadvertently worsen the enduring structural challenges faced by Mena’s labour markets… The time for reform is now.”

Stronger performance ahead

In 2024, BMI expects that Mena-wide growth will pick up to 3.2 percent, exceeding the 2015-19 average of 2.7 percent. 

The rebound will be driven by favourable dynamics in the oil economy in most GCC countries, including the expiry of some of the Opec+ supply cuts by the end of 2023 and Saudi Arabia’s reversal of its unilateral 1 million barrel-per-day cuts.

This will allow the UAE and Saudi Arabia to post the fastest growth in the GCC, and Oman to grow above trend next year. 

Weaker growth in services exports will offset gains in consumption and investment, keeping growth in Qatar broadly stable while, in Kuwait, investment activity will benefit from projects as part of the recently announced 2023-2027 development plan. 

In Bahrain, the below-trend growth masks a stronger non-oil economy from rebounding growth in its main trading partners and increased efforts to promote the tourism sector.

North Africa modest growth

BMI forecasts a modest acceleration in North Africa’s growth from 2.9 percent this year to 3.1 percent in 2024. 

Algeria will be the only North African economy were growth will slow, as maturing oil and gas fields will cause the country’s hydrocarbon production to fall. 

In Egypt, real GDP growth is forecast to grow to 4.4 percent as a result of rising foreign direct investment through the privatisation plan and strong government capital spending. 

That said, growth will remain below the historical trend because the challenging operating environment will continue to weigh on the local private sector, while inflation and higher borrowing costs will depress private consumption and technical issues will reduce hydrocarbon exports.

In Morocco, gradual reconstruction of areas affected by the earthquake and a strong agricultural sector will help raise growth to 3.1 percent in 2024. 

In Tunisia, BMI anticipates that growth will accelerate to 2 percent in 2024, supported by an IMF agreement that will shore up government finances and boost public consumption and investment. 

However, elevated political risk will cap investment activity, and the high cost of living will constrain private consumption growth. These headwinds, along with contracting oil production and a struggling agricultural sector, will keep growth below trend, BMI said.  

Slowdown in the Levant

Growth in the Levant is set to slow from 3.3 percent in 2023 to 3 percent in 2024, driven by Israel and the West Bank & Gaza.

BMI said it sees limited prospects for an IMF programme in Lebanon to address the country’s prevailing crisis in 2024, and growth will be restricted to 2.2 percent.

In Jordan, growth will remain almost flat at 2.7 percent. Slowing rates of growth in its key trading partners will weigh on exports, and offset gains from looser monetary policy and robust investment activity.

A modest rebound in headline growth from to 3.7 percent is expected in Iraq in 2024, boosted by an expansion in oil production.

Latest articles

Adnoc sought advice from investment banks on buying a significant stake in BP, a media report said

UAE’s Adnoc explored acquiring BP

Abu Dhabi National Oil Company (Adnoc) explored the possibility of acquiring British oil major BP but abandoned the plan as it did not fit into its strategic growth objectives, a media report said.  The talks did not advance beyond the initial stages, Reuters reported, citing informed sources.  The UAE state oil company also sought advice […]

Nature, Undersea cables account for as much as 90 percent of Europe-Asia telecommunications, Water

Iraq and Kuwait team up for European telecom corridor

Iraq’s Informatics and Telecommunication Public Company, a division of the Ministry of Communications, has signed an agreement with Kuwait’s Zajil Telecom to create a telecommunications corridor from the Gulf region to Europe, transiting through Iraq and Turkey. The new route will pass through Iraqi sea and land ports. Iraq’s minister of communications Hayam Al-Yasiri said […]

An artist's impression of part of the Diriyah Square development

Diriyah Square planned for historic Riyadh district

A public space featuring 400 retail outlets and 100 restaurants and cafes is planned for the historic Riyadh district of Diriyah. Diriyah Square will be announced next week at the World Retail Congress in Paris and aims to attract a combination of international retail brands and local artisans.  Diriyah Gate Development Authority group CEO Jerry […]

Turkish crude steel output rose 25% year on year to 3.2 million tonnes in January

Turkish steel in the black but EU rules rankle

Turkey’s steel industry has rebounded strongly from a weak 2023, despite facing new emissions standards and competition for important markets.  Crude steel output rose 25 percent year on year to 3.2 million tonnes in January, with domestic consumption of finished steel reaching 3.5 million tonnes, a 20 percent increase.  Exports were also up, increasing 23 […]