Political Risk Advisory Briefing: Middle East April 2020

The Latest Political Risk Advisory Briefing from KCS Group Europe focuses on the Middle East.

The Middle East is a complex and diverse region, encompassing both more advanced economies (e.g. Israel, the United Arab Emirates, Qatar), as well as countries which have been mired in civil war and could be classified as failed states (e.g. Yemen, Syria, Iraq). At one extreme, the State of Qatar is the richest country in the world measured by per capita GDP on a purchasing power parity basis, whilst at the other extreme, Yemen, which was already the poorest country in the Middle East before civil war broke out in 2015, is currently suffering probably the worst humanitarian crisis in the world with its economy devastated and critical infrastructure destroyed.

Whilst the countries of the Middle East account for slightly less than 5% of global GDP and circa 6% of the total global population, they are sitting on almost 50% of total proven global oil reserves and almost 40% of proved gas reserves (primarily concentrated in Iran, Saudi Arabia, Qatar, Iraq and the UAE).

The IMF projects a 1.2% contraction in the regional GDP of the Middle East in 2019 in real terms, followed by growth of 2.2% in 2020 and remaining in the 2.0%-2.5% range for the medium term. Whilst most countries in the region are forecast to post moderate real growth in 2019, Iran’s economy has entered a steep recession – driven primarily by a tightening of US sanctions – and the country’s GDP is expected to contract by as much as 9.5% in real terms this year (following a contraction of 4.8% in 2018).

The Middle East is one of the youngest regions in the world with an estimated 60% of its population under the age of 25. Youth unemployment is a serious issue in a number of countries, with approximately a third of the youth population unemployed in Jordan (36.7%) and Egypt (32.4%), and more than 20% in Iran (28.6%), Saudi Arabia (25.5%) and Turkey (21.3%), according to International Labour Organisation estimates.

Apart from the investment environment, key themes addressed below include: the recent wave of mass protests in Egypt, Iraq, Lebanon and Iran; and the increasingly aggressive behaviour of Iran as an apparent response to the US’s policy of “maximum pressure”.

Based on selected Grey Area Dynamics the Middle East as a Possible risk rating of 4

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