MENA FDI: Outperformers And Laggards

BMI View:  Political instability in large parts of the Middle East and North Africa will continue to weigh heavily on foreign direct investment inflows to the region as a whole over the coming years. That said, we see several bright spots for foreign investment and highlight particularly strong prospects for Morocco, Saudi Arabia and Egypt. By contrast, Iraq and Algeria are set to fall behind.

We expect continued political upheaval in large parts of the Middle East and North Africa (MENA) to remain an impediment to foreign direct investment (FDI) inflows over the coming years, weighing heavily on investor sentiment towards the region as a whole. According to UNCTAD data, FDI into MENA fell to USD55.6bn in 2013, their second lowest level since 2005. At 3.8% of the world's total FDI flows, this figure understates both the region's economic potential and its demographic weight (MENA accounts for 4.8% of global GDP and 5.7% of the world's population). Yet given the scale of the region's socio-political troubles, a broad-based recovery in FDI flows is unlikely for the time being.

A geographical breakdown of the 2013 data shows a mixed picture. Overall, eight countries recorded a rise in FDI inflows compared with 2012, while a similar number witnessed a fall. FDI to the five countries of North Africa combined fell by 12.3% on an annual basis, to USD12.4bn. Flows to the six economies of the Gulf Cooperation Council (GCC) declined for a fifth consecutive year but continued to account for 43% of the regional total (Israel alone made up another 21%). Within the Gulf, Saudi Arabia's traditional place as the largest host economy was overtaken by the UAE, which saw inflows of USD10.5bn amid favourable business sentiment and relative isolation from the regional political headwinds. 

Challenging Years Since The Arab Spring
MENA - FDI Inflows By Region, USDbn

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