Country Risk in MENA

Algeria (DZA)

Algeria faces a medium high overall risk. On September 7, President Abdelmadjid Tebboune was re-elected in an election marked by uncertainty over his candidacy for a second five-year term. Initially, Tebboune was reported to have won 94.7% of the vote, but after appeals, the election commission ratified his victory with 84.3% of the votes, with a voter turnout of 46.1%. In his second term, Tebboune will confront major domestic challenges, including high inflation, unemployment, and a growing budget deficit. Internationally, tensions with France have escalated after France recognized Morocco's sovereignty over the disputed Western Sahara region. Despite reforms aimed at reducing corruption following the Hirak movement, Algeria continues to struggle with institutional inefficiencies, lengthy bureaucratic processes, complicated customs procedures, and a volatile regulatory environment. These factors make the risks of political violence, legal and regulatory, and political interference to stand at a high level. Similarly, the risk of doing business in Algeria also remains high. Economically, the International Monetary Fund (IMF) projects Algeria's growth at 3.8% in 2024 and 3.1% in 2025, driven by rising gas exports, non-hydrocarbon growth, and fiscal expansion. The general government deficit is expected to widen from 3.0% in 2023 to 8.5% in 2024, largely due to increased spending in the election year; nevertheless, the country could make use of its Revenue Regulation Fund. The government's ability to provide fiscal stimulus is now considered a medium risk, up from medium low. Additionally, Algeria’s general government gross debt is forecast to rise from 46.4% of GDP in 2024 to 49.7% in 2025, associated with a medium high sovereign non-payment risk. Foreign exchange reserves, currently covering around 16 months of imports, have improved since 2022; however, the IMF predicts a shift in the current account from a 0.1% surplus in 2024 to a 1.5% deficit in 2025, driven by higher imports and potentially lower oil prices. Hence, the exchange transfer risk is assessed at medium high, increasing from a medium level.

Saudi Arabia (SAU)

The overall risk level remains medium, with political violence and political interference classified as medium high and medium risks, respectively. Under the leadership of Crown Prince and Prime Minister Mohammed bin Salman, Saudi Arabia has pursued a foreign policy focused on regional security and positioning itself as a global peacemaker. Key initiatives include re-establishing relations with Qatar in 2021, renewing diplomatic ties with Iran in 2023, engaging in peace negotiations with Yemen, and facilitating discussions on conflicts in Sudan and Ukraine. Additionally, efforts to normalize relations with Israel gained prominence prior to the Israel-Hamas conflict. This latter objective is particularly significant, as normalization could strengthen Saudi-U.S. relations, especially in defense, nuclear energy, and economic cooperation. However, such a move may trigger diplomatic backlash from other states in the region. Moreover, Saudi Arabia has stipulated that normalization requires a two-state solution, a condition Israel appears reluctant to meet. Regional political and security stability is critical for Saudi Arabia’s Vision 2030, which aims to diversify the economy. Notably, since 2023, the Kingdom has achieved robust growth in its non-oil sector, driven primarily by private consumption and investment. A large portion of this development is being funded through debt, making Saudi Arabia the largest issuer of international debt among emerging markets, surpassing China. According to the International Monetary Fund’s (IMF) Article IV, the country's GDP is projected to grow by 1.7% in 2024 and 4.7% in 2025, while public debt (as a percentage of GDP) is expected to rise from 28.7% in 2024 to 30.0% in 2025. Consequently, sovereign non-payment risk remains at a medium level. Recent reports suggest that the Kingdom is recalibrating its investment spending by adjusting budgets and prioritizing expenditures. Nevertheless, public investment will continue to play a crucial role in achieving long-term objectives. The IMF projects a fiscal deficit (as a percentage of GDP) of 3.3% for 2024 and 2.9% for 2025, resulting in a medium low risk in the government's inability to provide stimulus. Similarly, exchange transfer and banking sector vulnerability risks are also ranked medium low. Reserves remain above the IMF’s minimum reserve adequacy threshold, and the Fund expects the current account to shift from a surplus in 2023 to a small deficit in 2024. The banking sector remains robust, with low non-performing loan ratios and strong credit growth. These factors also contribute to a medium level of risk for doing business in Saudi Arabia.

United Arab Emirates (ARE)

The UAE's overall risk level remains at medium low. Political violence, political interference, and legal & regulatory risks are assessed as medium low. Businesses operating in the UAE benefit from an environment with low rates of violent crime and crimes against private property. Furthermore, the absence of corruption contributes significantly to the country’s favorable business climate. Additionally, the UAE’s legal and regulatory framework, designed to attract foreign investment, is supported by the infrastructure of its foreign trade zones. However, Human Rights Watch has raised concerns about the government’s zero-tolerance policy on dissent, which has resulted in the detention of numerous activists and dissidents. On the international front, the country’s position has been clear regarding the Israel-Hamas conflict; for instance, the Foreign Minister stated that the UAE will not engage in any post-conflict processes unless a Palestinian state is established. The risk of doing business remains medium low, triggering more economic partnerships with other countries. Recently, the UAE finalized an agreement with Australia, eliminating tariffs on approximately 99% of Australian products, particularly in agriculture and resources. Similarly, the UAE is working toward securing an economic partnership agreement with Japan. On the economic front, the UAE is projected to grow by 3.5% in 2024 and 4.2% in 2025, according to the International Monetary Fund. The Fund also forecasts that the country’s public debt will stabilize at around 30.3% of GDP in both 2024 and 2025. UAE bonds have benefited significantly from decreasing U.S. bond yields over the past year, which has helped maintain sovereign non-payment risk at a medium low level. The UAE's banking sector vulnerability risk is assessed as medium, with the sector being well capitalized and liquid, featuring low non-performing loan ratios and high asset quality.