Moderate growth of 3.4% seen for MENA
The Middle East and North Africa (MENA) region is set to experience moderate economic growth in 2025, with GDP projected to expand by 3.4%, according to the latest FocusEconomics Consensus Forecast.
While this marks an improvement from 2024 and surpasses the region's 2014–2023 average of 2.5%, the forecast has been slightly trimmed due to Opec+'s decision to delay oil output hikes. The economic expansion is expected to be driven by a gradual recovery in oil production and robust non-oil sector growth, particularly in the Gulf countries.
Inflation across the region is forecasted to remain uneven but less volatile than in previous years, stabilising as currency fluctuations in Egypt and Lebanon ease. In nations with US dollar pegs, inflation is expected to stay in low single digits.
However, risks remain, including potential currency devaluations, supply chain disruptions, geopolitical tensions, and food price spikes. The average inflation rate for MENA is projected at 5.9% in 2025, holding steady from the previous month's estimate, with a decline to 5.0% expected in 2026.
Monetary policy in MENA is largely influenced by the US Federal Reserve, as most central banks in the region maintain dollar pegs. Interest rates remained steady in January, in line with US monetary policy. However, as inflation and US interest rates ease, most MENA central banks are expected to implement rate cuts. The region's aggregate policy rate is anticipated to end 2025 at 5.20% before further declining to 4.49% in 2026.
Currency movements in MENA have shown an overall strengthening trend against the US dollar in the past month, largely driven by the US administration's decision to delay tariffs on Canada and Mexico. By the end of 2025, Algeria, Egypt, and Tunisia's currencies are expected to depreciate, while Morocco's currency is projected to appreciate, and Israel's currency is likely to remain stable. On average, regional currencies are forecast to decline by 0.4% against the US dollar in 2025 and 0.6% in 2026.
A Look Back at 2024
After two turbulent years, the MENA economy showed signs of aligning with its long-term trend by the end of 2024. Economic challenges in 2023 and much of 2024 stemmed from balance of payments crises triggered by high import prices and production cuts agreed upon by Opec+. However, import costs have since declined, and oil production levels are now benefiting from a more favorable comparison base.
In the third quarter of 2024, GDP growth accelerated in key economies including Abu Dhabi, Egypt, Jordan, Qatar, Morocco, Saudi Arabia, and Tunisia, marking the strongest expansion in several quarters. By the fourth quarter, Saudi Arabia—the region's economic powerhouse, accounting for a quarter of MENA's GDP—experienced its fastest annual economic growth in two years.
On the geopolitical front, the ceasefire agreement reached between Israel and Hamas in January 2024 provided a boost to investor confidence and stability in the region, which could support further economic recovery in 2025.
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