MENA’s Growth Rate Likely to Be 3.4% in 2025

Notwithstanding growing tensions in the region, the economic growth in the Middle East and North Africa (MENA) is expected to pick up to 3.4% in 2025 and 4.1% in 2026, the World Bank said on Thursday.

In its latest economic prospects for the MENA region, the World Bank said that the projection for 2025 was lower than expected in June, mainly because several major oil exporters extended some of the voluntary oil production cuts. The outlook in the region is subject to particularly high uncertainty given the continuing armed conflicts and still-high tensions in several countries.

Coming to the GCC countries, the growth is forecast to increase to 3.3% in 2025. Compared with the June forecast, the projection has been downgraded by 1.4 percentage points because of the extension of voluntary oil production adjustments. Among non-GCC oil exporters, activity in countries subject to the adjustments is expected to remain weak.

Among oil importers, growth is anticipated to pick up to 3.9%, on average, in 2025-26, mainly driven by stronger domestic demand as inflationary pressures ease.

In Egypt, the strengthening of activity will be supported by private consumption, amid abating inflation and remittances inflows, and investment on the back of financing from the UAE. The economic growth in Jordan, Morocco, and Tunisia is set to increase, while growth in Djibouti will moderate, mainly reflecting the stabilisation of port activity.

The outlook remains particularly uncertain for Lebanon, Syria, West Bank and Gaza, and Yemen as continued security concerns amid high geopolitical tensions are anticipated to constrain growth and escalate uncertainty.

Recent Developments

Elevated geopolitical tensions and conflict have heightened uncertainty in the region. The economy of West Bank and Gaza has been severely impacted, and neighbouring countries have also suffered from the repercussions of the conflict in the Middle East.

In Lebanon, although a ceasefire agreed upon in November 2024 has eased tensions, the conflict has resulted in severe damage. The transit of ships through the Suez Canal has remained constrained. There is also high uncertainty in Syria following political upheaval in early December 2024.

The growth in MENA remained subdued at an estimated 1.8% in 2024, dampened by restrained oil activity, mainly reflecting the extension of voluntary oil production adjustments in major oil exporters.

In GCC, growth has picked up, primarily because of strong growth of non-oil activity supported by robust labour markets and a recovery in capital flows. Among non-GCC oil exporters, growth is estimated to have softened in 2024, mainly owing to tighter policy stances, oil production adjustments, and political turmoil.

In oil importing countries, elevated inflation has slowed the expansion of private sector activity, and repercussions from the conflict in the region have also disrupted several economies. Growth in oil importers weakened to 2.3% in 2024.

In Egypt, a decline in shipping through the Suez Canal and a contraction of the manufacturing sector contributed to the slowdown in growth. Persistent drought conditions have adversely affected activity in Morocco and Tunisia.

Major Risks

Major downside risks to the outlook are an escalation of armed conflicts in the region and heightened policy uncertainty, particularly unexpected global policy shifts, the World Bank said.

In oil exporting countries, lower global demand and lower oil prices could further delay the end of the oil production adjustments, dampening region-wide growth prospects whereas among the oil importers, a further increase in protectionist measures by trading partners could reduce exports, while more persistent global inflation and tighter-than-expected monetary policy could adversely affect the cost of foreign financing.

Other downside risks include surges in social unrest and more frequent extreme weather events and other natural disasters. On the upside, easier-than-expected global monetary policy could lead to an easing of financing conditions. Stronger-than-expected growth in major economies could benefit activity in the region through higher global demand, the World Bank said.