MENA Economic Outlook 2024: Challenges, Opportunities, and Growth Prospects

The latest World Bank report on MENA highlights mixed economic growth in 2024, driven by the GCC while developing economies face deceleration due to conflict and socio-economic disparities. It underscores the need for policy reforms, gender equality in employment, and public sector restructuring for a more resilient future.

MENA Economic Update 2024: Analyzing Growth Amidst Challenges

The MENA Economic Update released by the World Bank in October 2024 paints a complex picture of economic growth and persistent challenges in the Middle East and North Africa (MENA). Projected growth for the region sits at a modest 2.2% for 2024, a small step up from the previous year's 1.8%. However, this average conceals significant disparities: the Gulf Cooperation Council (GCC) nations are leading the charge with higher growth rates, while many developing economies face setbacks exacerbated by geopolitical conflicts.

Economic Trends and Global Challenges

The past few years have been turbulent for MENA, marked by the global fallout from the COVID-19 pandemic and intensified by Russia’s invasion of Ukraine. These events have left a lingering impact, contributing to high inflation and stunted growth across the region. While the global economy is seeing tentative stabilization, MENA's outlook remains fragile, shadowed by uncertainty, especially surrounding the ongoing conflict centered in Gaza.

The Heavy Toll of Conflict

Nowhere is the economic strain more visible than in Gaza, which experienced an astounding 86% economic contraction in Q2 2024. This near-total halt in activity reflects a humanitarian crisis of unprecedented scale, with severe shortages of food, water, and medical supplies. The West Bank hasn’t been spared either, contracting by 23% amid tightened movement restrictions and a severe fiscal crisis.

Beyond these territories, the conflict’s ripple effects have reached neighboring economies. In Egypt, a sharp drop in Suez Canal revenues underscores the regional disruption, while Jordan reported a notable decline in tourism, critical for its economy. The report warns that the long shadow of conflict—marked by displacement, infrastructure destruction, and halted investments—has cost affected countries up to 45% in potential income growth, erasing decades of progress.

Socio-Economic Disparities and Gender Gaps

A striking theme in the World Bank report is the persistent gender employment gap, with women’s participation in the workforce at a mere 19%. Addressing this disparity could lead to substantial economic benefits, potentially boosting GDP per capita by as much as 51%. Yet, public sector reliance continues to absorb much of the available talent, limiting private sector expansion and innovation.

Moreover, poverty rates have surged, even before COVID-19. The economic landscape remains challenging, with more individuals pushed below the poverty line, reflecting deep-seated vulnerabilities.

Pathways to a Resilient Future

Despite these challenges, the report sheds light on pathways for potential growth. To move forward, MENA economies must leverage their strategic locations and embrace reforms that foster inclusive policies. Enhancing data transparency, boosting trade to facilitate technology transfer, and reallocating talent from the public to private sectors are essential steps. Notably, the success stories of reform, such as Saudi Arabia's efforts to bolster female workforce participation, offer valuable lessons for the region.

Inflation and Economic Diversification

Inflation, while easing, still plagues parts of the region, notably Egypt, Lebanon, and Iran. Oil prices are forecasted to decrease slightly in 2024 but remain a significant factor shaping fiscal balances, especially for oil-exporting nations.

Looking Ahead

The MENA Economic Update by the World Bank underscores that while current growth remains subdued, opportunities for a turnaround are within reach. However, achieving this potential hinges on comprehensive reforms, addressing socio-economic inequalities, and fostering stability. With the right measures, MENA can not only rebound but lay the groundwork for sustained, inclusive prosperity.