M&A and divestments prepare MENA companies for both growth and resilience against uncertainties.
When it comes to business opportunities, the Middle East and North Africa (MENA) region is currently an exciting place to be. In a complex world, investment appetite has been cooling in many of the so-called “BRIC” countries, with political instability, environmental issues and changing demographics creating uncertainty for investors around the world. By contrast, with a clearly recognized imperative for change, the Middle East is open for business. Accumulated government reserves and untapped oil stocks, combined with a relatively young population, will help finance future change, including a rapid shift toward a more diversified economy.
With such a strong potential for change and the funds to achieve it, MENA executives remain confident about both their economic prospects and about pursuing M&A to accelerate growth.
Perceptions about economic growth reflect a tale of two oil-rich countries
According to the results from the latest EY Global Capital Confidence Barometer, 68% of MENA respondents perceive that the global economy is growing, while 60% say their local economy is improving. However, it is a tale of two countries when it comes to the two dominant oil-dependent countries in the region. Where the United Arab Emirates (UAE) has been at the forefront of change for years, the Kingdom of Saudi Arabia (KSA) is now catching up. This transformative shift is reflected in each country’s growth perspectives. In KSA, large investments in infrastructure as part of the “Saudi Vision 2030” economic diversification program have KSA respondents feeling particularly bullish about growth (74% versus 49% a year ago). UAE lags slightly behind KSA in confidence. Even so, a healthy expansion in both the oil and non-oil sectors, as well as pro-growth government initiatives and rising investment ahead of Expo 2020, have 55% of UAE respondents feeling confident about growth (versus 41% a year ago).
Despite their confidence in the region’s potential for growth, MENA executives are bracing for challenges on the horizon. While only 28% of KSA respondents say they are expecting an economic downturn in the near to mid-term, 65% of UAE respondents and 90% of Egyptian respondents are anticipating economic challenges ahead.
Across the region, 37% of MENA respondents see geopolitical, local political and regulatory uncertainty as the greatest risks to the growth of their businesses. Such risks can be caused by both rapid change in the region, as well as the impact of the changing global economic climate and the possible impact that might have on the MENA region.