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Economic growth in the Middle East and North Africa (MENA) region will accelerate to 2.9% in 2025 from an estimated 2.1% in 2024 amid partial unwinding of oil production cuts, Moody’s Ratings said.
Inflation-adjusted real GDP growth for the region’s hydrocarbon exporters will surge to 3.5% this year from the 1.9% forecast for 2024, supported by Saudi Arabia, the UAE, Iraq, Kuwait, and Oman who have started to reverse some of their oil production cuts implemented in 2023, said Alexander Perjessy, Vice President- Senior Credit Officer at Moody’s.
During 2023 and 2024, oil production cuts deducted more than three percentage points, cumulatively, from the growth of hydrocarbon exporters.
Nonetheless, oil production is anticipated to lift the overall growth rate by around half a percentage point in 2025, Perjessy said.
The prospect of rising oil production volumes faces risks from moderating oil demand growth among key importers, especially China and from growing oil production outside of OPEC+, particularly the US.
Wary of these risks, OPEC+ announced a three-month delay of its planned production increase to April 2025.
Perjessy expects non-hydrocarbon economic activity to remain robust across the MENA region thanks to structural reform tailwinds, and large-scale investment projects.
In most cases, growth will be stronger in 2025 than during the five years before the pandemic, he stated.
The impact of large investments will be most visible in Saudi Arabia as high government and sovereign wealth fund spending related to the Vision 2030 diversification programme continues into 2025.
In the UAE, non-hydrocarbon growth will slow slightly due to the completion of some previous infrastructure projects, but will remain robust at around 5% in 2025.
Structural reforms since 2020, including the relaxation of foreign ownership limits, the introduction of long-term residency permits and the lifting of some social restrictions, have solidified the country’s appeal as a global trade, transportation, tourism and financial services hub, Perjessy said.
Growth in Qatar will be supported by the development of the petrochemical industry and construction activity related to the expansion of the LNG production capacity, which is planned to come online between 2026 and 2030.
In Kuwait, non-hydrocarbon growth will be driven by large projects, including constructing a new port and airport terminal, the analyst said.
(Editing by Brinda Darasha; brinda.darasha@lseg.com)