Amidst a global economic landscape being reshaped by digital transformation, demographic changes and climate shifts, the Middle East and North Africa (MENA) region, especially the Gulf Cooperation Council (GCC) countries, is leading a global digital transformation with strategic initiatives and significant investments in sustainable growth and innovation, said a top official of Investment Promotion Agency Qatar (Invest Qatar).

The region is among the early adopters of and possibly future contributors to the digital economy, owing to proactive government initiatives, substantial investments in technology infrastructure, and a tech-savvy population, said Gokhan Celik, Senior Manager, Research and Policy Advocacy, at Invest Qatar.

Celik analyses how the region is spearheading this change led by technology, sustainability and innovation.

Technology

Transformative technologies such as artificial intelligence, robotics and blockchain are expected to dominate value creation. Foreign Direct Investment or FDI in digital sectors in the Middle East grew by 50% in the last decade, attracting major global players, according to the 2022 Revision of World Population Prospects by the United Nations.

Sustainability

The move towards sustainable practices is a key trend reshaping the global economy. Despite challenges, including stringent regulations and stranded assets, the green transition will induce productivity through green technologies investments.

Transforming the electrification of economies from 20% to 70% by 2050 entails sector-wide transformation, necessitating extensive collective action and massive capital expenditure.

Investment Hub

Amidst these structural changes, the MENA region, particularly the GCC, is emerging as a promising avenue for investments. Diversification efforts have notably increased non-hydrocarbon GDP, elevating the region's global economic role beyond energy supply.

Located strategically at the gateway of Africa, Asia and Europe, the MENA region is crucial for global trade, with 30% passing through the Red Sea and the Gulf of Aden. Additionally, GCC economies attracted significant FDIs, surging from $20 billion in 2017 to $68 billion in 2022.

Demographic Trends

They are shifting towards stabilisation and ageing, bringing challenges like pressures on resources and climate stress. However, the MENA region stands out with its growing and relatively young population, projected to remain younger than the global average at 40% vs. 34% in 2050, according to the 2022 Revision of World Population Prospects by the United Nations.

With the working-age population (aged 15-64) expected to remain close to two-thirds (62%) of the total population, the region is poised to surpass 750 million people by 2050, the report added. This demographic surge promises significant productivity gains through quicker and more effective adoption of innovative technologies, offering an enormous “demographic dividend”.

Clean Economy

The MENA region, with its abundant capital and commitment to green transition, is well-positioned to adapt to the new clean economy.

With annual investments in clean energy expected to grow to $326 billion by 2040, the region is committed to clean energy technologies to address climate change concerns. In 2022, Middle East renewables capacity exhibited the highest gain globally, increasing by 12.8% YoY, with Qatar exhibiting the highest gain in the region.

Global Security and Trade

With the increased economic integration, global security concerns are impacting the economic landscape. Trade-related national security issues, cybercrimes and peace index are all trending high risks.

Located on the marine chokepoints and hosting strategic energy sources, the MENA region assumes a key role in mitigating global security risks. The heavy container traffic through the Red Sea and the growing air transit corridor highlights the region’s potential as a leading logistics and trade hub.

Future Outlook

Ultimately, the strategic importance of the MENA region, especially the GCC countries, is set to rise in the context of major global economic trends.

Navigating these trends and harnessing the benefits of transformation requires a high level of awareness, national commitment and good governance. By staying vigilant and adaptable, the MENA region can leverage its strategic advantages to drive sustainable growth and innovation in the global economy.

Global Economic Trends

From the Industrial Revolution to the technological transformation, the global economy has been in a constant state of flux. Black swan events such as the pandemic have exposed the limitations of the most sophisticated hi-tech economic models.

Therefore, policymakers must adapt to the ever-changing economic landscape, adopting Heraclitus’ philosophy of “expect the unexpected”.  

Today, several major global trends are shaping the economic and social landscape:

• Demographic changes: Global shifts are leading to social and economic pressures in some countries while opening new markets and consumer segments in others.

• Digital transformation: Technologies are revolutionising product and factor markets, altering business models and creating new avenues for innovation and efficiency. The global digital economy is expected to exceed $11 trillion by 2025.

• Green transition: The green agenda is gaining unprecedented momentum like never before. With the global market for major mass-manufactured clean energy technologies projected to exceed $650 billion per year by 2030.

• Economic fragmentation: Nations are now prioritising self-sufficiency amid major security threats, encouraging local innovation and resilience despite deepening economic fragmentation.

Despite challenges, the global economy is expected to hit the 200 trillion-dollar mark before 2050, doubling its current size, according to the fourth edition of the BMI Megatrends Report.

Generative Artificial Intelligence (AI) will likely drive substantial productivity gains, particularly in advanced economies. Inflation – a gauge for well-being – will be shaped by supply shocks from fragmentation and extreme weather events, as well as the deflationary effects of technology adoption. – TradeArabia News Service