MENA Business Outlook: 27 Business Outlooks and Why They Matter

In launching the MENA operations of the Virginia Institute of Finance, we retooled or wrote from scratch 37 course outlines designed to meet the training needs of our clients in 2017 and beyond!

We combed business and scholarly publications from the Gulf region and beyond to see the challenges our firms will face in 2017 and beyond. What we found: 27 business outlooks from futurists, analysts, scholars, and journalists we think our clients should know. We’ve read them and organized them into five areas that we will roll out in blog posts over the coming weeks.


Oil has been a main economic driver in the GCC for decades. While that remains hugely important to the region, efforts to diversify the economy from the top, as well as small and medium business formation – both enabled by new technologies – are leading to the potential for a more diverse economy.

We have corralled our 27 outlooks for 2017 into five areas that we believe will drive business needs and opportunities in the Gulf region in the months to come. Today is our first blog posting, on economic outlooks. We’ll roll out the other four – addressing demographic, educational, technological, and societal outlooks – over the coming weeks.

Links to sources are provided; note that MEED links require a subscription.

ECONOMIC OUTLOOKS: It’s complicated

The drop-in oil prices of 2014-2016 presented the classic opportunity situation for GCC countries. The opportunity is for oil-dependent economies to become more diverse, and ultimately more robust in the long run. At the firm level, the problem is the need to replace and diversify revenues and control costs with discipline; the greatest opportunities will come to organizations that invest in the skills of their employees.

Here are our seven outlooks related to finance.


break-even oil price

gov't reliance on O&G revenues

gov't deficit as % of GDP - 2017

oil reserves in years

sovereign wealth fund in years

scope for new taxes (out of 10)

local employ- ment %

projected GDP growth - 2017


























































Rabobank. The GCC: going cold turkey on oil? Jurriaan Kalf and Alexandra Dumitru, June 30, 2016.


ICAEW and Oxford Economics. Economic Insight - Middle East: Q4, 2016.

1.    “NEW NORMAL” OIL PRICES OF $50-$65. MEED’s Richard Thompson predicts, "After two years of economic uncertainty as a result of roller-coaster volatility in oil prices, there is a strong sense that some kind of equilibrium has been reached in the energy markets that will underpin a prolonged period of relative stability in oil prices.... the ‘new normal’ oil price is likely to be in the $50-$60-a-barrel price." Other outlooks range from the mid-$40s to the high $60s and above – but it is likely that the triple-digit glory days are over.

2.    GCC STATES FEEL SHORT-TERM BUDGET PRESSURE; RESPONSES WILL SET THE STAGE FOR LONG-TERM ECONOMIC GROWTH. Each GCC nation has a different breakeven oil price – what the price must be for their current budgets to balance – level of reliance on hydrocarbon revenues to balance its budget, and proportion of budget deficit as a percent of its GDP. Each nation has a different level of oil reserves and sovereign wealth based on oil sales of the past, which can fill budget gaps in the short run, and scope for new taxes that will add to revenues in the long run. And each nation has different tools at its disposal to boost long-term economic growth, including the percentage of its workforce comprised by locals as compared to expatriates. Shrewd deployment of these tools will ease or confound future economic growth over the long term.

3.    PRIVATISATION GAINS STEAM. MEED’s Sarmad Khan writes that privatization is set to move up a gear in 2017. Far-sighted observers of the GCC have long seen privatization as part of the region’s economic future. 2016 may have been the year when concrete steps in that direction matured; 2017 may be the year when such efforts reach the point of no return. The Saudi National Transformation Programm, launched in April 2016, put resources and a timetable behind a privatization plan that could generate the largest IPO in history, the planned sale of 5% of Saudi Aramco. While skeptics suggest an oil price recovery could push the 2018 date into the indefinite future, plans move forward. Furthermore, MEED sources report that 146 of less attention-grabbing Saudi entities could also be privatized or sold as public shares. Likewise, in Dubai privatization was discussed in 2007 and in 2010; the 2016 announcements, while still sketchy, contained more specifics, including “structural changes” in government that name specific ministries. Kuwait announced an ambitious oil privatization plan in late 2016, while Bahrain has suggested it would privatize 100% of certain non-oil enterprises.

4.    INCREASED TRANSPARENCY BECOMES THE NORM. Privatization and diversification bring heightened levels of financial disclosure to a firm, as analysts determine the firm’s value and their ability to sell shares or float bonds. While the Saudi Aramco has garnered worldwide attention – and in Dubai guessing its value “has almost become a dinner party game” – the stakes are high for other public entities and for firms as well. In the words of John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh, “The Aramco IPO is not just going to help make the company more transparent but will also help the country become more transparent. The economic impact is beyond just attracting foreign investors in the local market but also placing Saudi Arabia on the global map of reform, diversification and progress.” The impact of the increased demand for transparency will be felt in many ways. The e-audit system launched in Saudi Arabia in December will make information more immediately and widely available – not just audits, but contracts, payments, and reports. Islamic banks are taking steps to make their accounting compatible with IFRS accounting rules, enable more widespread and standardized financial reports.

5.    SKILLS ARE REWARDED. The 2015 Chatham House report by Jane Kinninmont, Future Trends in the Gulf, points out that all the Gulf states “have long-term plans envisaging a transition to a post-oil economy, developing a mix of energy-intensive and knowledge-based industries, employing more nationals in the private sector.” Both this economic diversification in the long term, as well as privatization discussed above, point urgently to the need for greater employment skills in the Gulf states. Finance and accounting skills will be needed on a vast scale, not only to price entities for privatization but also to facilitate market financing for ordinary business needs and expansion. The title of an article about the construction industry by MEED’s Colin Foreman sums it up thus: The year of the auditor and the search for cash. Increasing employment of nationals at all levels will require culturally appropriate leadership and management training. Implementation of systems and infrastructure requires expertise in project management. And growth plans for entities, large and small, heighten the need for strategy and planning skills. Richard Marshall’s observation about the construction industry, showing the need for rigorous cost control and efficient management, is applicable to other industries as well:

2016... saw markets begin a fundamental transformation which should set them on the path of more sustainable growth as they look to increasingly tap the private sector. That said, 2017 will still be challenging…. There will be a heavy focus on cost efficiency and margins….

6.    NEXT GENERATION FINTECH TOOLS MAY BRING LEAPFROG ADVANTAGE TO THE REGION. The Future 100: MENA Trends and Change to Watch in 2016, by Mennah Ibrahim of J. Walter Thompson’s Innovation Group MENA, points out that the 80% of MENA residents currently unbanked could bypass traditional banks for peer-to-peer systems and mobile payment methods, such as Egypt’s Dopay or Dubai’s BitOasis – or the barter shop  EZHeights. MEED’s Hossam Abougabal reports that the UAE's rhetoric surrounding innovation remains strong, with its first phase containing 30 national initiatives to be completed within three years, including innovation incubators. There is a pragmatic tone to the drive; Abougabal quotes Paul Smith, head of programming at Dubai Future Accelerators, saying "Innovation for innovation's sake is something the government is not about. We are trying to utilize the best ideas and existing models from around the world and provide them a place to grow.” In a similar way, Saudi Arabia is taking important behind-the-scenes steps for digital growth to take root. Mohammed Rasooldeen of the Arab News writes that a new committee will enable the government to coordinate with the private sector for increased coordination in exchanging data and information, as well as boosting the base of statistical data in the Kingdom.

7.    SECTORS TO WATCH: HEALTHCARE, EDUCATION, FINANCE, REAL ESTATE, CONSUMER GOODS, AND TOURISM. In his book Frontier Investor: How to Prosper in the Next Emerging Markets, author Marko Dimitrijević identifies growth in certain sectors – and consumer staples, leisure travel, retail and luxury goods, residential real estate, and health care – as “megatrends” in the Middle East and other so-called frontier markets. Healthcare and education are seen as early candidates for privatization by MEED’s Sarmad Khan, who writes that “some 295 hospitals and 2,259 healthcare centers could be operated by the private sector by 2030." Mennah Ibrahim’s The Future 100: MENA Trends and Change to Watch in 2016 includes ten trends each related to brands/marketing, beauty, retail, health, lifestyle, luxury, and travel/hospitality. The Arab News quotes Simon Allison, CEO of HOTFEL, saying that Dubai and other MENA destinations are attracting increasing numbers of tourists from Asian source markets, with India in the lead. While currently driven by mega events and government efforts, there is an increase in trade related to tourism with other Islamic countries at the grassroots level. Middle East Business reports that the 12th World Islamic Economic Forum, held in August in Jakarta, hosted over 4,000 delegates, whose deals in Islamic finance, real estate, the franchise industry, the halal industry and others totaled nearly $900 million.           

Stay tuned for VIF’s DEMOGRAPHIC outlooks in the next blog posting.

Call us at +971 4 430 8394