Atradius� latest report on Middle East and North Africa analyses challenges faced by the region and identifies opportunities for economic diversification to fuel future growth

�

HONG KONG SAR -�Media
OutReach�- 1 December
2020 -�The oil-dependent economies of the Middle East
and North Africa (MENA) have been dealt a fresh blow by COVID-19, but the
region can limit the damage and rejuvenate growth by focusing on fiscal
consolidation, technological innovation and economic diversification, according
to Atradius' latest MENA economic report.

�

Buffeted by geopolitical
challenges and a range of social issues, the MENA region -- a grouping that
includes the Gulf Cooperation Council (GCC) nations -- has been further weakened
by the pandemic and faces an unprecedented slowdown of -7.0%
in 2020, the report notes, arguing that it's in the countries' best
interests to intensify diversification efforts, which have been underway for
some time now, in order to secure long-term growth.

�

Shakeups in the oil industry
have seen traditional oil exporters cede market share to the US shale industry
and lose control over the price of oil while a potential easing of sanctions on
Iranian oil exports poses another risk, leaving even the most financially robust
GCC countries, such as Kuwait, Saudi Arabia, UAE and Qatar, vulnerable and
struggling to maintain current living standards for coming generations, according
to the report.

�

As the steady flow of
petrodollars -- which helps fund government spending and private consumption -- has
dwindled, it has contributed to widening the persistent twin deficits of the
region's economies. This, in turn, is blunting the policy tools at the disposal
of MENA governments and hurting their ability to support other traditional
growth engines, such as construction and real estate, which contribute between
10-15% to the GDP of GCC countries, according to the report.

�

"The
twin oil-coronavirus crisis has had a large negative impact on most sectors in
the non-oil economy with significant credit risk implications,"
noted�Schuyler
D'Souza, Managing Director Middle East, Atradius. "The IMF in its latest report on the region estimates
that the
default risk for corporates has doubled and Atradius can confirm that payment
performance has deteriorated across the weaker sectors due to falling demand,
cash flow constraints and insufficient support from banks." �

�

Other key findings include:

�

*In Saudi Arabia, pro-growth
policies are expected to revive the construction sector while hydrocarbon
investments will underpin growth in the medium term alongside diversification
efforts as part of Vision 2030. Local skill shortages coupled with an exodus of
expats are key challenges.

�

*The UAE, one of the most
diversified Gulf states, has a promising medium-term outlook. Its protracted
recovery will be stimulated by the postponed World Expo, its ability to attract
foreign investment, and its status as a renewables pioneer.

�

*Egypt's accommodative monetary
policy is expected to partially offset a drop in tourism, infrastructure
spending will boost construction while new gas finds will enhance exports.

�

The report forecasts the MENA
region will expand by 3.6% in 2021 and 4.0% in 2022 -- most of which will be
driven by the non-oil sector as oil prices are unlikely to rise significantly
in the near future -- and identifies the most promising sectors to help drive
growth in the region. These include education, information & communication,
fintech and pharmaceuticals. Other focus areas are aiding the growth of the manufacturing
sector in North Africa and the Middle East's push for renewables.

�

"North African economies,
specifically Morocco and Tunisia, can build on the ongoing shift to high-tech
manufacturing and expansion of their trade networks while the Middle East is
well endowed with renewable energy sources and raising funds for renewable
energy projects is becoming easier," noted Niels De Hoog, Senior Economist,
Atradius. "These efforts must be taken to the next level because holding on to the
current economic model will form an increasing drag on growth."

�

Get the Atradius MENA Economic
Report here: https://atradius.com.hk/en/publications/economic-research-mena-economic-growth-engine-falters.html

�

About Atradius

Atradius is a global provider
of credit insurance, surety and collection services, with a strategic presence
in over 50 countries. The credit insurance, bond and collection products
offered by Atradius protect companies around the world against the default
risks associated with selling goods and services on credit. Atradius is a
member of Grupo Catalana Occidente (GCO.MC), one of the largest insurers in
Spain and one of the largest credit insurers in the world. You can find more
information online at www.atradius.com.hk