Country Risk in MENA

Egypt (EGY)

Egypt’s overall risk level remains high. Political violence risk rating remains very high, with political interference and legal & regulatory risk at high. Egypt remains concerned about Israel’s renewed escalation in Gaza and the risk that it could spill over into domestic tensions, including the risk of displacement of Gaza residents. The government also remains apprehensive that any future domestic protests against Israel actions in Gaza could become anti-regime protests. The previous cost-of-living crisis also continues to risk future protests against inflation and unemployment.  Meanwhile, the Israel attack on Hamas in Qatar, has also prompted concerns over a potential attack on Hamas in Egypt.  Egypt/Israel relations are very strained. 

Meanwhile, the financial situation for Egypt remains better, despite the adverse effects of the Gaza war on revenue from the Suez Canal and tourism. Egypt enjoys great multi-year funding helped by IMF/EU/World Bank programs and the huge USD35bln UAE investment to build a big tourist city on the Mediterranean coast alongside new investment commitments from Qatar and Saudi Arabia.  All of this points to a cyclical rebound in Egypt’s economy, with the IMF forecasting 4.3% growth in 2025.  Even so, though the IMF remain broadly supportive of Egypt, the July 2025 IMF review is critical of the military’s large distorting involvement in the economy, as well as the slow progress on privatisations ambitions. President Sisi’s bias towards mega projects and need for support from the army also suggests that multi-year fiscal consolidation will likely disappoint. Additionally, inflation is projected to only slow to 20.4% in 2025 and 11.8% in 2026, which is still too high for the domestic economy and will at some stage require a crawling Egyptian Pound depreciation to avoid the real exchange rate becoming overvalued.  Though the current account deficit is projected to come down to 4.3% of GDP in 2026, Egypt has import dependency for wheat and natural gas. However, the healthy external funding improvement help temper concerns about sovereign debt payments. Sovereign non-payment risk has moved from high to a medium high rating as government debt/GDP is coming down from high levels and projected to be 87% in 2025. The risk of doing business is medium high and the inability of government to provide fiscal stimulus remains at high.

Kuwait (KWT)

Kuwait’s overall risk rating remains at medium. Parliament had been dissolved early this year for up to 4 years, to help get necessary reforms through.  Though Kuwait is now moving towards some long overdue structural reforms, the country faces pressure from the IMF to do more while the economy remains very reliant on fossil fuels. Kuwait’s Vision 2035 ambitions also need to be viewed in the context of Saudi Arabia recent decision to slow down its Vision 2030 program. GDP growth is set for 2.6% in 2025 (lower oil prices) before rebounding to +3.9% in 2026 on a reversal of the production cuts.  The political violence measure also remains at medium, though with no current signs suggesting that the ongoing power struggle could escalate into a more volatile or violent situation.  The support for the overall risk rating comes from oil exports helping government revenues and a current account surplus of around 26.5% of GDP for 2025. This means that sovereign non-payment risk is at medium-low, while banking sector vulnerabilities are also at medium-low. Kuwait has also undertaken measures after coming under criticism from the FATF for not doing enough to investigate and prosecute money laundering and terrorist financing.

Lebanon (LBN)

Lebanon’s overall risk remains high in Q3 of 2025. Early this year, parliament had elected former military chief, Joseph Aoun, who appointed his prime minister as Nawaf Salam. The new administration has re-engaged talks with the IMF, taking steps to address international concerns and incorporated reforms into banking and public finance. Political interference continues to be considered as high, while legal & regulatory risk remains very high. The political environment is far from stable, as the Iran backed militant group Hezbollah had refused disarmament, despite a ceasefire with Israel being agreed that all non-state armed groups should be disarmed.  Hezbollah has accused Israel of repeatedly violating the terms of the ceasefire. Israel continues to push Lebanese officials for the disarmament of the Hezbollah, which the Lebanon’s military leadership had rejected after the demand. Lebanon officials believe the aggressive approach could ignite further civil unrest and cause the collapse of a disarmament strategy. Additionally, with U.S. sanctions in place, Lebanese officials are lining up a potential cut of Iranian funding due to the country’s financial links to Hezbollah. Overall, political violence continues to be assessed as very high.

In terms of the Lebanese economy, GDP growth had contracted by -7.5% in 2024, however, the World Bank project 4.7% growth in 2025, expecting a slight recovery driven by a boost in the tourism sector and the development of reforms. Lebanon is expected to remain fragile into 2026 due to the spill over of political conflict. Focus remains on the disarmament of Hezbollah, while in October 2025, the Trump administration had approved a USD 230 mln of funding to support the Lebanon security forces in disarming the armed group of Hezbollah. National security has been the focus of government funding. Therefore, the inability of the government to provide stimulus has worsened to high. Inflationary pressure was very volatile in 2024 at 45.2%. The World Bank, however, forecast rates to moderate to 15.2% in 2025 relying on the continuation of exchange rate stability. Exchange transfer continues to be considered medium-high risk. Lastly, government debt to GDP, according to the IMF, hit 163.8% in 2024, with Lebanon having defaulted on USD 31 bln of outstanding international bonds in 2020, costing the currency 99% of its value. September saw Lebanon’s central bank state that elevated interest rates would complicate their efforts to restructure its international bonds. Non-sovereign risk remains medium high, while the risk of doing business continues to be assessed as high.

Libya (LBY)

Libya continues to be quite volatile with an overall risk that remains very high. East-West division of the African state, resulting from the 2014-2020 civil war, means that Abdul Hamid Dbeibah is still recognised internationally as the Prime Minister in his Government of National Unity (GNU), based in the Western capital, Tripoli. In the eastern city of Benghazi, the Government of National Stability (GNS) is led by Prime Minister Oussama Hammad and is supported by the Libyan Armed Forces, led by military commander Khalifa Haftar. Divisions between the East and West are looking far more rigid and permanent. Political interference and legal & regulatory risk both remain very high. In particular, the GNU have national relations with both Turkey and Qatar. Turkey supplies the North African country with manpower (Turkish-Syrian militias) and necessary equipment. In terms of the GSN: Russia, Egypt and the UAE all support Libya and have established a presence at several air bases under GSN control in the East. Additionally, disputes continue between the East and West over the central bank’s decisions and activities; the production of the country’s oil and social welfare for Libyan citizens. Political violence is assessed as very high risk. The assassination of the most powerful militia leader Gheniwa had sparked violent clashes in the capital, Tripoli, following attacks outside the central bank. Fatal attacks had led to 70 civilians’ deaths. Libya have also continued to receive allegations of the mistreatment of migrants and refugees entering the country, even with some cases resulting in death. The U.N. in early November has urged Libya to close their detention centres as countries like Britain, Spain and Norway raised concerns that migrants fleeing toward Europe have been subjected to violence in Libya.

Economically, the IMF estimate that GDP growth will remain high at 15.6% in 2025, however, predictions indicate a drop to 4.2% in 2026. The backbone of Libya’s economy is built up on its oil and gas sector with some of the largest oil reserves in the entirety of Africa. Although, there is high dependence on the hydrocarbon sector alongside political tensions prohibiting potential development of this key driver of the economy. The risk of doing business continues to be considered as very high, though the inability of the Government to provide stimulus has risen to a high-risk rating. Inflation has remained quite low with an expected 2025 rate of 1.8%, following an estimate that the trend will continue at 1.6% in 2026. The Libyan Central Bank in August had authorised the printing of LYD 60 BN (USD 11 bn) to address liquidity shortages, while also playing a key role as the guarantor of a balanced budget amid the tense and uncoordinated relationship between the GNU and GNS. Exchange transfer risk has worsened to a very high rating, while banking sector vulnerability is assessed as medium low.

Morocco (MAR)

Morocco remains to hold an overall risk of medium. Mohammed VI continues to rule as the King of Morocco, while Aziz Akhannouch also holds his role as PM since 2021. The next general election is scheduled for late 2026. Political interference remains medium, while legal & regulatory risk continues to stay medium high. In late October, the UN Security Council had come to an agreement and had approved a U.S. backed resolution that supports Morocco over the disputed Western Sahara. Although, the vote was divided alongside strong Algerian opposition, the resolution offers the best chance for Morocco’s plan to keep sovereignty over the Western Sahara. China, Russia and Pakistan abstained, while Algeria opposed the measure, stating that the resolution was an improvement but still remains to have some, ‘shortcomings’. European members, U.S. and an increasing number of African allies are supporting the Moroccan resolution. Domestically for Morocco, political violence remains medium high, as youth protests had grown violent in October 2025 over demands for better education and healthcare. Hundreds had been arrested and injured, and infrastructure had been vandalized. In the light of this and major unemployment issues, Morocco’s 2026 budget will now allocate USD 15 bln to healthcare and education in 2026, a 16% increase from last year’s budget. The inability of the government to provide stimulus is regarded as medium risk, as the unemployment rate fell to 13.1% in September 2025 from 13.6% the previous year. According to the IMF, GDP growth is forecast at 4.4% in 2025, with an expected 4.2% growth in 2026. The agricultural sector continues to be highly important for Morocco’s growth, although inconsistencies regarding weather conditions can prohibit its exports and growth. In addition, in March 2025, Morocco approved an investment plan for a green hydrogen strategy worth over USD 35.15 bln, aiming to leverage its strong solar and wind resources in collaboration with EU stakeholders and U.S. companies. Public debt to GDP will be 67.2% in 2025, according to the IMF. Government debt is forecast to continue reducing as a debt management strategy has been put in place. Thus, sovereign non-payment risk remains medium high, while exchange transfer is considered medium. Finally, the IMF forecast 1.2% inflation this year, a reduction from its previous estimate as food prices dropped.  Meanwhile, the Central Bank of Morocco had kept their policy rate unchanged in September 2025. Therefore, banking sector vulnerability is assessed as medium risk.

Oman (OMN)

Overall risk in Oman is considered medium, alongside political interference, political violence and legal & regulatory risk all collectively remaining medium. Under an absolute Monarchy where the Sultan hold both legislative and executive power, Haitham bin Tariq Al Said has remained as both the Sultan and prime minister of Oman since January 2020, after being named as his cousins’ successor. Oman’s relationship with the U.S. has developed over decades, sparking the Free-Trade-Agreement (FTA) that was agreed back in 2009. Confirmation of Oman’s 10% reciprocal tariff does not cause as much disruption as other economies facing similar discretions, as the FTA allows for the likes of minerals, fertilizers and stones to remain exempt from the addition of tariffs. Tightening global trade still sees Oman maintain positive relations with all major global powers due to the country’s diversification and strong trade relations with UAE, China and India. According to the IMF, the current account is forecast to be on the rise since its negative shift to -1% of GDP in 2025, with an estimated shift to -0.7% in 2026. Meanwhile, neighbouring country, Yemen, continues to pose a significant security threat as ongoing disputes between the Iran-backed Houthi and Yemen’s government have not seen much positive movement. Security concerns include the smuggling of arms, militant movement and also the rise of refugee movement into the state. Oman remains neutral in their position regarding the Yemen conflict, aiming to mediate a peaceful solution while Saudi Arabia and the UAE are attempting to gain a greater influence in the south of Yemen.

Historically Oman have been characterized as an oil dependent economy due to their geographical location, however, growth is on the rise not only due to oil production but also the state’s efforts to diversify its economy. According to the IMF, GDP growth is forecast to be 2.9% in 2025 and estimated to shift to 4% in 2026. Oil prices have stabilised as concerns have been eased that the oil market was becoming over supplied. Alongside Oman’s oil production, the expansion of non-oil industries has come into the conversation through the Oman Vision 2040 project, a project that wants to deviate to more private sector led development in tourism, manufacturing and logistics. In addition, inflation remains modest and is currently forecast to be 0.5% in 2025, while estimated to shift to 1.5% in 2026 by the IMF.  Therefore, the risk of doing business and the government’s inability to provide stimulus both remain medium low. Since the Covid 19 Pandemic, Oman’s government debt has turned a corner from the highs of 67.9% of GDP in 2020. Debt reduction has been helped by the use of hydrocarbon revenues collected to pay off, repay and buyback a portion of central government debt. Sovereign non-payment risk is assessed at medium, with the IMF forecasting government debt at 35.1% of GDP in 2025 and 33% in 2026. Finally, the Oman’s official currency remains the stable and robust Omani Rial. A fixed exchange rate continues to be pegged to the USD (OMR 0.38 to 1 USD). Exchange transfer is unchanged at medium-low.

West Bank/Gaza (PSE)

President Trump’s 20-point peace deal in October remains fragile due to Hamas’s long-term stance and divisions in the Israeli government. The situation will need to be watched carefully in the coming months. What is clear is that Israel’s government is in no mood to talk about a two state solution after Hamas’s Oct 7 2023 atrocities. With Arab nations concerned about civilian deaths in Gaza, tension remains high beneath the surface, and this will delay a lasting peace and reconstruction – especially with the U.S. itself reluctant to commit finances for reconstruction. Economic growth numbers will rebound strongly in 2026 from a low base (UN estimate Gaza’s 2024 economy at only 13% of 2022 levels) if the ceasefire holds, but FDI and financing flows are key to watch for sustained growth in the coming years. West Bank tensions also remain. Right wing political pressure in Israel still want to officially annex parts of the West Bank, though PM Netanyahu is more reluctant given Trump’s threat to reduce support for Israel in such a scenario (Arab countries have pressured Trump on this). The Israel Knesset approved a non-binding annexation in July and a further symbolic vote occurred in October. Israeli settlers/West bank Palestine tensions remain high, which could worsen the unstable security and economic environment in the West Bank. All of this means that the West Bank and Gaza risk rating remains at high.  The inability of government to provide fiscal stimulus has moved from medium high to high, while sovereign non-payment risk rating has gone up to medium-high.  

Yemen (YEM)

Overall risk in Yemen has remained very high. The country, which is located in the southwestern corner of the Arabian Peninsula, is led by the Presidential Leadership Council (PLC) with Rashad al-Alimi as chairman. Rashad al-Almi has been chairman since 2022, with the recent appointment of Prime Minister Salem Saleh bin Barik in May 2025 (who previously served as finance minister). Political interference, legal & regulatory risk and political violence have all remained very high. Yemen’s Iran backed Houthi paramilitary, who declare themselves to be part of the ‘axis of resistance’, had fired missile strikes into Israel over the Gaza conflict. The government of Yemen (PLC) continue to push to find a resolution in the civil war between the Houthis, however, government control is weak as the Houthi have control of the capital, Sanaa, but also the northern province of Sadaa. In August, the Prime Minister of the Houthi-run government, Ahmad Ghaleb al-Rahwi, had been killed alongside many other ministers in an Israeli strike on the capital. In terms of social disruption, displacement continues as citizens flee Houthi-controlled provinces, describing the militant group as misusing international aid to grow their own military presence, driving people into starvation and silencing anyone that would challenge the Houthi. Additionally, the U.S. have launched large-military strikes on the Houthi due to ongoing threats against ships traveling through the Red-Sea. Houthi threats against ships in the Red-Sea have come to a halt since the U.S.’s attack.

According to the IMF, GDP growth is forecast at -1.5% decline in 2025, while a further estimate suggests growth to hit 0% in 2026. Between 2015 and 2024, the UN had raised USD 28 bln in humanitarian aid for Yemen, contributing mostly to Houthi controlled areas. However, aid is normally hijacked by the Houthis in a way that made citizens join the militia or trade for essential resources. Additionally, strikes on ports in Houthi controlled areas, along with liquidity shortages, have continued to strain Yemen’s imports and limit access to essential goods. In areas under control of the Internationally recognized government, inflation continues to damage purchasing power. The IMF have forecast an inflation rate of 20.4% in 2025, as a standard food basket had risen 26% compared to the previous year. The risk of doing business therefore remains very high. Government debt to GDP remains high, with an IMF forecast of 71.4% in 2025 and an estimation of 68.5% in 2026. Stabilization measures in August had brought Yemen’s exchange rate to YER 1,676 per USD, however, long term stability depends on fiscal discipline and progress in resolving the on-going conflict. Sovereign non-payment risk and exchange transfer both continue to be considered as high risk.

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