Middle East (Enmaeya News) — The Middle East is grappling with mounting economic and political pressures as global and regional factors increasingly intersect. Its strategic location and role in energy and trade make the region particularly sensitive to fluctuations.
Energy remains central to the region’s economies. Oil and gas exporters face revenue declines, with the IMF reporting a 6.4% drop in fiscal balances in 2024. The International Energy Agency predicts global oil supply will rise by 2.5 million barrels per day in 2025, pressuring prices amid slower demand and growing competition.
Importing countries gain temporary relief from lower prices but remain vulnerable due to heavy import dependence and rising debt.
Fiscal deficits and public debt are rising across the region. Average deficits stand at 3.4% of GDP, ranging from 2.4% in energy exporters to 7.6% in importers. External debt now accounts for roughly 53% of GDP, narrowing fiscal space and raising debt-service costs.
Global supply chain disruptions—from conflicts to climate events—have wide-reaching impacts on food, medicine, and industrial materials. The FAO reports a 7.6% rise in food prices through July 2025. Even minor supply disruptions can increase costs by 8.5%, exposing vulnerabilities in regional food security and healthcare.
Geopolitical tensions continue to weigh on growth. Conflicts have cost the region more than $800 billion over the last decade, with tourism and investment particularly affected. Tourism contributed 6.7% of GDP in 2023, generating $459 billion and 3 million jobs, but competition and instability limit growth.
The region’s close financial and trade ties to the U.S.—including $1.5 trillion in reserves invested in U.S. markets—amplify exposure to American economic fluctuations. Weak regional economic integration further limits resilience, with inter-Arab trade below 18% of total trade, compared with 66% in the EU.
Other challenges include water scarcity, climate change, low R&D investment, limited economic diversification, and youth unemployment.
Per capita water availability is under 500 cubic meters annually, far below the global average. R&D spending averages 0.7% of GDP, and youth unemployment exceeds 26%, rising above 35% for women.
With rising geoeconomic competition from China, the U.S., and the EU, Middle Eastern economies face a critical test. Policymakers must implement flexible strategies, strengthen regional cooperation, and diversify economies to navigate global volatility and ensure sustainable growth.
