MENA region remains at the cusp of a tectonic shift, commanding one of the most influential positions in the bustling geo-economic sphere, evident in the transition of the world economy from conventional to renewable energy in the race towards Net Zero by 2050.
The ongoing deliberations at COP28 in Dubai, UAE, symbolise the symphony of interests across the economies, making up the influential block in carving out a collective future with an undistracted emphasis on the triple bottom line: Planet, People and Profit.
The 3Ps are inextricably linked to each other in achieving a sustainable future for the world.Â
Robust economies
MENA, comprising some of the most robust economies in the world, maintains a bright spot on the economic landscape in the backdrop of a darkening global economic outlook marred by a spate of exogenous shocks, not least seen in the Covid-19 pandemic and inflation tantrums emerging as a direct fallout of the Russia-Ukraine conflict.
Despite these headwinds, significant economies, including Saudi Arabia and UAE, are projected to clock a real economic growth rate of 4% for the FY ending 2024, even as the momentum stays unabated for incremental growth opportunities at least until Q1 2024.
Landmark developments
Several landmark developments, including the Kingdom of Saudi Arabia winning the bid to host Expo 2030, pivot the region towards an accelerated growth trajectory. The previous successes of EXPO 2020 and FIFIA 2022 have already provided a rich precedent in showcasing positive economic vibes linked directly with hosting international events, commanding an enviable reputation.
Alongside the GCC, the inroads made by emerging markets, including Egypt, Jordan and Morocco, through an emphasis on calibrated measures in keeping the inflation hood under check while also preserving the intrinsic value of sovereign currencies – despite temporary headwinds – espouse confidence in the eye of the global investment community.Â
Monetary stability
Monetary stability is an essential precursor to achieving development goals as access to capital feeds through investment and, in turn, leads to resilient consumer spending, inevitably creating a virtuous cycle to the benefit of societal progress. Towards this end, MENA has an unmatched advantage in the form of a digitally savvy demographic dividend.
The explosive growth in the start-up scene across countries in the MENA region covering diverse sectors, including Technology, Fintech, Robotics & AI, and Healthcare, bears testament to the thriving entrepreneurial ecosystem alongside traditional industries, placing the region competitively in the global economic landscape. UAE’s ranking as among the top 25 globally competitive economies released by the World Economic Forum (WEF) corroborates the narrative.Â
Sovereign wealth funds
Supporting the ambitious economic ecosystem through direct and indirect interventions through providing affordable finance by the sovereign remains fundamental for achieving economic prosperity. In this area, MENA has an unrivalled advantage of hosting some of the biggest sovereign wealth funds (SWF), providing opportunities for regional investment in critical sectors and promising ventures.
Fiscal buffers carved out of rich hydrocarbons and central bank reserves offer enough opportunities to diversify economies away from Oil and gas in creating a thriving Knowledge economy with a presence of diversified sectors providing an impetus to the vast reservoir of human talent by creating sustainable employment opportunities. Sustainable employment remains an essential pillar even as competition between humans & AI garners heightened tension in the race to achieve technological prowess.Â
Stock market
Even as the race towards automation intensifies, with its relatively high disposable incomes, MENA is well placed to open investment opportunities by further reforming the capital markets. The popularity of Saudi’s Tadawul and UAE’s ADX and DFM exhumes sufficient confidence in looking at this region as the new oasis of capital as western-weary institutions embrace these markets as the new Wall Street.
The slew of disinvestments undertaken by government entities enabling local and foreign investors to participate in successful equity issuances provides new investment opportunities, deepening the liquidity of capital markets even further.
Savings led investment
A region hosting both local and expatriate populations can channelise savings into prudent investments in capital markets by institutional fund managers well-equipped to generate long-term returns commensurate with the risk appetite of savers. The recently launched new pension savings scheme in the UAE enabling employees to invest in return-attractive plans sets an excellent example worthy of emulation by other countries in the region. Saving-led investment has the potential to generate a multiplier effect in extending the virtuous cycle of consumption-led growth.
Empirical research and Western evidence suggest capital markets are engines of economic growth that funnel passive income opportunities, creating a virtuous loop that binds income and development. The US alone commands penetration of pension funds in capital markets to 52%. Though there is a long way to go to achieve a similar level, MENA economies have an opportunity to galvanise savings to boost economic growth by reforming capital markets further.Â
Profit with purpose
As a melting pot of cultures hosting diverse populations seen through the symphony of religions, races and practices, MENA has an unbridled advantage in boosting its banking and financial system by embracing Islamic Finance, aka Ethical Finance, for achieving financial inclusion on both size and scale. As economies transition to clean energy, the relative similarity in the trio of Islamic-Sustainable-Climate (ISC) Finance provides a pathway for financial institutions to provide capital at different levels, including consumer, retail and government, on the preamble of ‘profit with purpose’.Â
In conclusion, MENA is perhaps placed in the most distinctive position as the world confronts a jamboree of problems from climate change to geopolitical tensions to reimagine economies as engines of growth supported by innovative financial architecture to leave an indelible mark of economic prosperity on its people and planet.