MENA: Our new outlook and upgraded coverage for a region at a crossroads Copy

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The Middle East and North Africa (MENA) is at a crossroads, both economically and politically. A war ravages the Levant, inflicting immense human suffering and threatening to boil over into a wider regional conflict. But despite the war, the MENA economy remains one of the world’s most promising. Regional powers, such as Saudi Arabia, are pushing for a political settlement to the conflict that would guarantee longer-term peace and stability. Riyadh and neighboring capitals are impatient to continue sowing the seeds of their countries’ future economic success: In 2022, the MENA economy grew at the fastest rate since the early 2000s, and the non-oil sector’s share of GDP among Gulf countries was up 9 percentage points from a decade ago. 

Our new outlook on the region

To reflect the MENA region’s growing clout, this month we penned a fresh outlook for the region’s economy over 2024–2028. The report is free and covers our Consensus Forecasts for GDP growth, oil and non-oil output, inflation and the fiscal balance. 

Our upgraded coverage of the region

In addition, this month we also upgraded our coverage of Qatar and Kuwait, two of the region’s most promising economies. Our coverage now features dedicated written analysis for both countries on high-frequency economic data―written by our in-house team of economists―including GDP, purchasing managers’ index readings, industrial production, oil production, and inflation. As well as this, our coverage now includes quarterly forecasts for GDP growth and inflation for both Qatar and Kuwait, as well as monthly data for oil production, industrial production and purchasing managers’ index readings. Finally, our coverage contains new detailed charts and panelist breakdowns for additional indicators for both countries, including private consumption, total investment, public debt, exports and imports.    

 

Insight from our panelists

On the outlook for regional GDP growth, analysts at Fitch Solutions said: 

“The MENA region’s growth will slightly accelerate from 1.9% in 2023 to 2.4% in 2024 but face major headwinds from the Israel-Hamas war, slower growth in key economies, and the Red Sea crisis. The GCC will see growth accelerate from 0.6% to 2.6% in 2024, driven by normalisation of oil production and strong non-hydrocarbon sector performance, particularly due to investment in diversification efforts. Growth

Has the Euro area escaped its low-inflation trap for good?

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For much of the 2010s, inflation in Euro area countries undershot the European Central Bank’s 2.0% target, due to a combination of domestic factors—chiefly weak demand—and external factors, such as peak globalization and depressed oil prices from 2015 onwards. That all changed after the end of the Covid-19 pandemic, with global supply chains snarling up as demand recovered rapidly; inflation has now overshot the ECB’s target for over two years. But what does the future hold for inflation in Euro area countries? 

Inflation in Euro area countries expected to meet target

Our Consensus is for inflation in Euro area countries to finally converge to the 2.0% target by the middle of next year, and to then remain roughly steady on average over the medium to long term. This would be a notable increase from the 1.4% average in the 2010s. There is a large discrepancy among our panelists though: Average inflation forecasts for 2025 range from 1.2% to 3.0%, while those for 2026 range from 1.5% to 2.8% for instance. 

Multiple factors will drive price pressures

The EU’s push away from Russian gas and toward clean energy will raise costs for industry and consumers, as will rising global protectionism and a general desire among countries to boost supply chain security over out-and-out efficiency. Plus, the EU labor market is forecast to remain tight in coming years amid population aging, with our panelists forecasting wage growth around 50% higher than during the 2010s as a result; this will prop up inflation in Euro area countries in turn. 

Upside risks to inflation abound

Escalating tensions between the EU and China are a key upside risk to inflation. The bloc could impose tariffs on Chinese electric vehicle imports later this year, and has recently launched investigations into several other aspects of China-EU trade relations. Then there is a potential Donald Trump win in the U.S. presidential elections this November: He has threatened to impose tariffs on all imports, which could lead Europe to retaliate by raising its own trade barriers in turn. And conflicts in the Middle East and Ukraine could intensify, disrupting global shipping as well as oil and agricultural output. So while inflation in Euro area countries is set to return to target, don’t bank on it staying