Kuwait City: Growth in the Middle East and North Africa (MENA) is forecast to moderately accelerate in 2025 amidst uncertainty, according to the World Bank's latest Middle East and North Africa Economic Update released on Wednesday.
According to Kuwait News Agency, the region is estimated to have grown at 1.9 percent in 2024, with growth expected to rise to 2.6 percent in 2025, as stated in the report titled "Shifting Gears: The Private Sector as an Engine of Growth in the Middle East and North Africa." These forecasts come amidst a rapidly changing global environment, bringing significant uncertainty.
Oil-exporting countries are anticipated to see growth due to plans to roll back cuts in oil production. In oil-importing countries, growth is expected to be driven by increased consumption as inflation eases and a recovery in the agricultural sector in some economies. However, factors such as conflict, extreme weather shocks, developments in oil markets, and a changing global policy environment contribute to the uncertainty surrounding these forecasts. Additionally, volatile trade dynamics could impact global growth and inflation.
The report emphasizes that conflict could undo decades of economic progress with long-lasting negative effects. It also explores the essential role of the private sector in driving growth, creating jobs, and promoting innovation. The absence of a thriving private sector has hindered stronger growth in the region.
The report notes that the private sector in the MENA region lacks dynamism, with declining labor market productivity across many countries. Few firms are investing and innovating, and there is minimal market entry and exit. A divide persists between a small formal sector and a large informal sector, especially in terms of productivity. Moreover, women's participation in the private sector remains low.
Ousmane Dione, World Bank Vice President for the Middle East and North Africa, stated, "The region has long underused human capital. Women are largely left out of the labor market. Businesses can find more talent by attracting women leaders, who in turn will hire more women." He highlighted that closing the gender employment gap could significantly boost income per capita by about 50 percent in a typical MENA economy.
The development of a more dynamic private sector requires complementary roles from both governments and businesses. Governments can enhance firm performance by promoting market competition, improving the business environment, and investing in data collection and access.
Roberta Gatti, World Bank Chief Economist for the Middle East and North Africa, remarked, "A dynamic private sector is essential to unlocking sustainable growth and prosperity in the region. To realize this potential, governments across the region must embrace their role as stewards of competitive markets."
The report concludes that businesses can enhance capacity by improving management practices. Leveraging the untapped potential of women entrepreneurs and workers could stimulate growth. A more promising future for the MENA private sector is possible if governments rethink their roles and firms effectively invest in and utilize talent.