The Middle East is on a steady path towards economic recovery from the impacts of Covid-19 with MENA GDP growth rebounding to 2.7 percent in 2021 and strengthening further to 3.8 percent in 2022.
This was driven by the largely successful vaccine rollouts, increasing oil prices, and various governments’ initiatives and reform, speakers at global investment firm Franklin Templeton’s webinar Investing Beyond the Storm: A Global and Local View on a Post-Pandemic World, which took place on Monday, agreed.
Because of the vaccine rollouts and well-managed lockdowns, mobility normalisation is on the horizon for the region which in turn will accelerate economic rebound, especially in Saudi Arabia and the UAE, explained Bassel Khatoun, senior managing director, Frontier and MENA, Franklin Templeton Emerging Markets Equity.
The UAE has reached a rate of 140.02 doses per 100 people as Covid-19 vaccine distribution, according to the latest Ministry of Health figures, while Saudi Arabia plans to have vaccinated 70 percent of its population by year-end.
“Crucial fiscal and economic reforms, timely and ample liquidity support” have provided the basis for this economic growth and were supported by higher crude prices and the mobilisation of ambitious project spending plans, said Khatoun.
“Alongside efforts to diversify revenue streams away from oil, we’ve seen that ambitious capital expenditure plans remained largely intact, all of which we expect to support economic activity further, and across a multitude of sectors,” said Khatoun.
“What that means is more spending around milestone events, including the Expo 2020 in the UAE, the World Cup in Qatar in 2022, as well as the transformational Red Sea Project in Saudi Arabia, that will only boost economic activity further. Lots of these projects have already mobilised, spearheaded by government entities like Saudi’s PIF with strong incentives in place for private sector participation,” he continued.
Bassel Khatoun, senior managing director, Frontier and MENA, Franklin Templeton Emerging Markets Equity
In April, The Red Sea Development Company, the developer of Saudi’s Red Sea Project, said it secured a $3.76 billion (SAR14.120 billion) loan and revolving credit facility with four Saudi banks: Banque Saudi Fransi, Riyad Bank, Saudi British Bank and Saudi National Bank who will finance the loan.
Given this framework, it is the right time for international and regional investors to consider the GCC for their asset allocations and investments, agreed the speakers.
“The impact that the virus and lock downs had on revenues and oil prices is now in the rear-view mirror, and we expect that this normalisation will continue throughout the year.
Mohieddine (Dino) Kronfol, CIO of Global Sukuk and MENA Fixed Income, Franklin Templeton
Therefore, we do have a bias to take on more corporate risk but with a more risk-aware focus and a closer eye on valuations,” said Mohieddine (Dino) Kronfol, CIO of Global Sukuk and MENA Fixed Income, Franklin Templeton.
“We continue to encourage regional and international investors to make the asset allocation to the GCC because the region not only enhances your returns it does a very good job of diversifying your risk,” he added.
An economic recovery is underway globally as well, across regions and services, said Zehrid Osmani, portfolio manager for global equities at Martin Currie.
“With fiscal stimuli accounting for over 15 percent of global GDP and rising with additional announcements since the start of the year, there is the potential for a prolonged positive industrial cycle,” said Osmani.
Zehrid Osmani, portfolio manager for global equities at Martin Currie
“The speed at which the stimuli are channeled into the real economy will determine the shape of the recovery, but we could be looking at a more prolonged positive economic cycle, given the longer duration infrastructure projects that help stimulate economies,” he continued.
Midterm global investment opportunities exist in healthcare infrastructure, cloud computing and cybersecurity, online education and gaming, 5G, renewable energy and electric transportation among others.
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