Recent Trends: Despite Rising Trade Tensions and Global Uncertainty, Activity in the Middle East and North Africa (MENA) Region Has Strengthened
Partially driven by the rise in oil production, the MENA region has seen an increase in activity, despite global uncertainty and trade tensions. In oil-exporting nations, the oil sector has recovered following the announcement in early April 2025 of the gradual elimination of voluntary production cuts, while the non-oil sector has shown resilience.
In oil-importing economies, the private sector has returned to growth, partly due to reduced political tensions and macroeconomic stabilization in several nations, notably in the Arab Republic of Egypt. Activity, particularly in the construction sector, has strengthened in Morocco. However, activity in the West Bank and Gaza has been devastated: productive capital has suffered heavy destruction in Gaza, where the humanitarian cost of the conflict is massive, while the West Bank is experiencing an intensification of tensions.
Geopolitical tensions in the Middle East had somewhat eased after the ceasefires in late 2024 and early 2025, but violence has resumed in Gaza and Lebanon, and the situation remains highly fragile and uncertain. Tensions have remained high in other fragile and conflict-affected countries.
Outlook: Growth in the MENA Region is Expected to Accelerate
Growth in the MENA is expected to accelerate to 2.7% in 2025, firming up to 7% in 2026, and 4.1% in 2027. This dynamic is largely explained by a progressive expansion of oil production, which more than compensates for the effects of the decline in oil prices, despite the weight of increased trade barriers on exports. Forecasts have been revised downward compared to January, mainly due to the rise in trade restrictions and investment and export activity uncertainties.**
Growth in the Gulf Cooperation Council (GCC) countries is expected to strengthen progressively, reaching 3.2% in 2025, 4.5% in 2026, and 4.8% in 2027. The relaxation of quotas is expected to lead to an increase in oil production, despite the forecast decline in oil prices due to weakening global demand. The expansion of non-oil activity is also expected to continue to drive growth. Among oil-exporting countries not part of the GCC, activity is expected to be slowed down by the fall in oil prices and the decline in external demand.
In oil-importing countries, forecasts anticipate an acceleration of growth to 3.6% in 2025, 3.9% in 2026, and 4.3% in 2027, mainly driven by the strengthening of private consumption, the recovery of agricultural production, and the assumption of an easing of geopolitical tensions. In Egypt, growth is expected to progress following the deployment of the investment agreement concluded with the United Arab Emirates. It is expected to firm up in Morocco and Tunisia with the expected improvement in weather conditions. In Djibouti, port activity, export revenue, and significant foreign investment in port infrastructure development will fuel growth.
Among economies and conflict-affected countries, Lebanon is expected to post a growth rate of 4.7% this year, provided the truce holds. For the West Bank and Gaza, forecasts expect a rebound in 2026. In Syria, activity is expected to improve this year, driven by the improvement in relations with major economies. However, due to the security situation, GDP is expected to decline again in 2025 in the Republic of Yemen.
Risks: The Possibility of an Intensification of Protectionist Trade Measures by Trading Partners Continues to Pose a Major Risk to the MENA Region
The aggravation of uncertainties surrounding global trade policies, if prolonged, could also erode business and consumer confidence, and decrease investments in the region. More restrictive monetary policies than expected due to rising global inflationary pressures could lead to higher borrowing costs, capital outflows, and currency depreciations. In oil-exporting countries, a decline in oil prices beyond the reference scenario could reduce budget revenues and growth prospects. A resurgence of armed conflicts in the region, as well as an increase in violent incidents and social unrest, and the occurrence of more frequent and severe natural disasters, could also slow down activity in the region.**
Download the Global Economic Prospects: https://www.worldbank.org/gep
