Global monetary policy is likely to set the tone for the Gulf Middle East and North Africa (Mena) markets next year, as more countries in the region seek to rebuild their economic development models away from oil, experts note.

According to Matt Weller, head of market research at Forex.com, after two years of aggressive interest rate hikes, traders seem to think that 2024 will bring a “pivot” to interest rate cuts from major central banks. Scenarios for interest rate cuts run the gamut from benign “immaculate disinflation” to a dire synchronised global recession or a negative shock that changes the entire economic paradigm requiring immediate interest rate cuts across the globe, as was the case with Covid.

Fresh forecasts from Fed Chair Jerome Powell and his policymaking team show ‘the federal funds rate will be 4.6 per cent at the end of 2024,’ but central bankers are adamant that they won’t start cutting interest rates imminently. As a result, the US dollar could benefit from fewer rate cuts than expected following a relatively quiet 2023.

Nevertheless, traders currently believe that the European Central Bank (ECB) will be the first to kick off interest rate cuts no sooner than April, followed by others including the Fed in May and June. In a nutshell, as long as economic conditions continue to show modest growth, central banks are likely to keep interest rates higher than they’ve been in recent history to ensure that inflation does not become entrenched.

Start-ups & venture capital

In recent years, the Middle East has turned into a vibrant hub for start-ups especially in the tech industry. Thriving start-up sectors in the GCC include e-commerce, fintech, health-tech, transportation and logistics, as well as renewables.

According to Forbes, the “Mena’s 50 most-funded startups raised around $3.2 billion in 2022, up 6.7 per cent from 2021”, while an STV study highlights that “45 startups valued at a minimum of $1 billion are expected to emerge in the Mena region by 2030, led by Saudi Arabia”. In the UAE, governmental efforts also aim to double the contribution of the digital economy to the country’s GDP from 9.7 per cent to 19.4 per cent over the next 10 years. Although some challenges remain to be addressed, tech startups seem to have a promising future in the GCC, contributing to the region’s economic diversification and technological advancement.

Tourism and hospitality

Following the lifting of Covid-related restrictions, avid world travellers have flocked back to the Middle East, considered one of the main tourism hubs in the world.

According to travel analysis company Forwardkeys, Saudi Arabia was fifth in a global ranking of international arrivals in 2023, while the UAE and Egypt ranked eighth and tenth respectively. “The Middle East and Africa region is the only area to record expansion in international tourist inflows for the fourth quarter of 2023,” the company said, underlining that the region’s international tourist arrivals are set to grow by 2 per cent in the fourth quarter with a continued growth in 2024.

While travel activity could be affected by the Israel-gaza war in Levantine countries, the UAE’S positioning as a safe leisure and entertainment destination will further boost its hospitality and tourism sector. Similarly, by opening up to the world, KSA is striving to become a popular tourist destination by the end of the decade, with plans for the sector to contribute by more than 10 per cent to the national GDP. Qatar and Oman are also working towards attracting more tourists.

Crypto looks bright

The International Market Analysis Research and Consulting Group projects that the GCC cryptocurrency market size will have a compound annual growth rate of 53.85 per cent between 2024 and 2032. Many reasons stand behind this substantial growth, including infrastructure development led by governmental investments, the wide adoption of digital technologies, and sizable economic diversification efforts.

A greener future

The Middle East is showing strong commitment and determination to play a key role in leading sustainability projects and initiatives for a greener tomorrow. According to Strategy&, part of the PWC network, the Middle East has the potential to witness an economic growth valued at $3 trillion while creating over 1 million future-proof jobs by 2030. “Governments and corporate leaders can leverage the region’s abundant renewable resources to manufacture carbon-neutral and carbonnegative industrial products for exports, or to diversify their energy mixes,” the report said.