Q1 2021 MENA Outlook
Bridging strategic ties
As we enter 2021, we are cautiously optimistic. The new virus mutation underscores the precarious nature of the crisis, but promising news on the development and deployment of vaccines is expected to accelerate the timeline for containment. While it will not be smooth sailing, the MENA region will start to show its green shoots in 2021, but this will not be across the board. Some of the larger/more diversified economies of the region such as Egypt and parts of the GCC are set to recover more rapidly. Gulf country's recovery is supported by their greater budgets for vaccines and a potential rebound in oil markets. However, the various new tax measures, a declining expatriate population and anaemic recovery in the tourism sector will place a drag on growth and hold back business sentiment.
On the geopolitical front, 2021 will mark a decade since the Arab Spring created the popular desire to change the established order in the MENA region. Looking back, while democracy is far from flowering everywhere, as some Western observers had hoped to see, we can certainly point to change across the board, in some countries more successfully than others. Even the Gulf monarchies have responded to the Arab Spring in their own ways. But new fault lines have also emerged and with international players that normally come to the rescue, preoccupied, some countries in the region are likely to continue to drift sideways – this is expected to delay recovery and dampen opportunities in countries like Libya, Lebanon, Syria, Yemen and Sudan.
For our regional theme this quarter, we wanted to take the long view and inspire ourselves from other emerging markets. We looked at relations between Latin America (LatAm) and the MENA region and found that developments now extend beyond the impressively large Arab diaspora in LatAm, but traditionally thin merchandise trade. The shift in dynamics coupled with new pockets of opportunity brought on by COVID-19 are critically key to the MENA region’s diversification story. We see an expanded opportunity set, increasing returns and lower risk over time as investment flows continue to grow in both directions. Have a look as you chill over the holiday and bid farewell to the 2020 annus horribilis!