Q3 2020 MENA Outlook Extended Outline

MENA Post-COVID:

Next Generation Digitisation

Our regional theme this quarter looks at innovation and digitisation in MENA. The region has had to endure the double whammy of low oil prices and the impact of COVID-19, but some sectors have managed to thrive in the downturn; the pandemic has irreversibly amplified the role of disruptive technologies and digitisation. Telecommunications technology is expanding and will continue to do so along with new edtech, healthtech and fintech digital platforms.

• With the lockdowns, demand for telecommunication services has increased alongside higher mobile penetration and greater internet accessibility.
• Mobile data consumption will continue to grow rapidly: 5G services are already a reality in MENA with the GCC leading the way.
• Entertainment platforms such as on-demand streaming platforms have gained popularity, opening doors to new investment opportunities.
• MENA revenues from streaming and entertainment services are expected to reach USD 2.1B in 2024 from USD 1.5B in 2018.
• Prior to the coronavirus crisis, we already saw an acceleration in healthcare and education delivery in the region. MENA's healthtech and edtech sectors are now growing rapidly, with local startups attracting higher investment and initiating public-private partnerships.
• We expect demand for e-commerce and fintech in MENA to remain above pre-pandemic levels -- both sectors grew throughout the region, accelerated by home isolation.
• The two sectors move in concert: with a stronger presence, new fintech will also revolutionise MENA's e-commerce.
• Barriers to growth in some sectors -- such as government restrictions based on protectionism and in some cases, social control -- are unlikely to return after the pandemic, especially as pressure for further liberalisation persist.
• However, we expect governments to maintain some limits to protect their operators -- many of which are owned by the state or majority-controlled by it -- as well as to maintain a certain level of internet censorship.

For our regional outlook, we examine how MENA is having to adjust to lower oil prices, this time lower for longer than in the recent past, while providing adequate stimulus to support domestic economies taking a hit. This means slower growth and steeper fiscal deficits.

• Most countries have started to ease their COVID-19-related restrictions to allow their economies to start recovering, but we will not see the impact of any stimulus packages aimed at supporting domestic growth until H2, by which time many of the measures will have been phased out.
• The pandemic has made a serious dent in global oil demand; the EIA now sees demand at 92.5 Mb/d for all of 2020, down from more than 100 Mb/d last year in 2019. A full rebound is not expected in 2021.
• We are braced for an uptick in street protests in some countries as the full impact of the economic slowdown registers in people’s pockets. Many of the challenges now exacerbated by the pandemic were there before, and had been slow to resolve. That is the problem.
• Political unrest is already defying lockdowns in various spots and could regain momentum once they are fully lifted, as economies register the impact.

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