Country Risk in MENA

Egypt (EGY)

Egypt’s overall risk level remains high. Political violence risk remains very high, with political interference and legal & regulatory risk at high. The government remains apprehensive that protests against Israel actions in Gaza could become anti-regime protests. The ongoing cost-of-living crisis also continues to risk protests against high inflation and unemployment. Meanwhile, President Trump’s plans for a forcible removal of Palestinians from Gaza have been countered by the Arab nation’s reconstruction plan, but neither is gaining much traction with Israel opposed to the Arab nations plan and U.S. congress unwilling to supply funding for Trump’s idea.  Even so, Egypt remains worried about Israel renewed escalation in Gaza and this spilling over into tensions within Egypt.

Meanwhile, the financial situation for Egypt remains better, despite the adverse effects of the Gaza war on revenue from the Suez Canal and tourism. The IMF remain supportive of Egypt, with a focus on the broad thrust of privatisations ambitions and subsidy reduction rather than meeting every detail of the IMF program – privatisations have been delayed.  President Sisi’s bias towards mega projects and need for support from the army also suggests that multi-year fiscal consolidation will likely disappoint. Even so, Egypt also enjoys good multi-year funding projects helped by EU/World Bank programs and the huge USD35bln UAE investment to build a big tourist city on the Mediterranean coast.  This has all helped to stabilize the Egyptian Pound versus the USD in recent months. All of this points to a cyclical rebound in Egypt’s economy, with the IMF forecasting 3.8% growth in 2025.  However, inflation is projected to only slow to 19.7% in 2025 and 12.5% in 2026, which is still too high for the domestic economy and will at some stage require a crawling depreciation to avoid the real exchange rate becoming overvalued – the current account deficit is projected to come down to 3.7% of GDP in 2026. However, the healthy external funding improvement not only helps the currency, but also allows smooth sovereign debt payments. Sovereign non-payment risk is at high however as government debt/GDP is still too high 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.

Jordan (JOR)

Jordan’s overall risk remains medium high. King Abdullah II remains Head of State. Political interference is now medium high, alongside legal & regulatory risk. War in the Middle East continues to impact Jordan. Jordan have condemned the war between Israel and Hamas and continue to prioritise their own safety. Sentiment remains tense, as war continues after the fragile ceasefire deal at the start of 2025 and as the future uncertainty beyond remains unclear. The majority of the Jordan population are of Palestinian-origin. Jordan have taken in some Gazan children of which they have received medical support. As the new US administration have come in and try to navigate the future of the Middle East, President Trump has put pressure on Jordan alongside Egypt to take in Palestinians from Gaza after he announced his Gaza rebuild plan. King Abdullah met President Trump at the White House in February in which he rejected Trump’s plan. After Jordan opposed to the plan, the US have threatened to withdraw USD1.7 billion worth of support and military assistance, a sum which the fragile Jordan economy relies on. Meanwhile, Jordan have agreed a 3 billion EUR with the EU over cooperation over halting migration into the bloc. In terms of the economy, 2.6% growth is forecast for 2025 and 2.9% for 2026. The economy has inevitably suffered due to the tensions in the Middle East with low consumer and business sentiment and falling tourism. In addition, the Central Bank of Jordan started to ease the policy rate at the end of 2024, but have yet to cut so far this year due to the inflation backdrop with the IMF forecasting 3.6% for 2025 and 2.6% for 2026, after 0.2% of price rises in 2024. Alongside this, less Fed easing could impact policy as the Jordan Dinar remains pegged to the USD, while reserves remain strong. Jordan will be a big recipient of FDI from the Gulf States such as the UAE and Saudi Arabia. The UAE have signed an agreement to invest USD2.3 billion on a railway connecting the port of Aqaba and mines of Al-Shidiyah and Ghor Al-Safi. However, Jordan’s economy remains frail with the unemployment rate reaching 21.4% in 2024, high debt and the heightening climate threat. Government debt to GDP will reach 92.6% this year and 88.6% in 2026. There also remains high levels of corruption and tax evasion issues. Fiscal consolidation is required through cuts to public expenditure. The inability of the government to provide fiscal stimulus and sovereign non-payment remains medium high. Furthermore, a -5.5% current account deficit is expected for this year as exchange transfer risk remains medium high. Jordan will continue to rely on external financing and support from the international partners and the IMF who have made available support for Jordan under its USD1.2 billion 4-year program. Jordan are one of the most vulnerable countries to droughts, putting pressure on natural resources, agriculture as well as energy and utility systems. The risk of doing business is now at a medium level.

Kuwait (KWT)

Kuwait’s overall risk rating remains at medium. After the April 2024 elections, Emir Mishal decided to dissolve the parliament and suspend parts of the constitution for up to four years. This is a worsening of the power struggle between the ruling Al Sabah family and parts of the judicial and legislative branches due to long-running disagreements over debts, stateless people and redrawing of electoral boundaries. However, Kuwait’s is now moving towards some long overdue structural reforms, though faces pressure from the IMF to do more and the economy remains very reliant on fossil fuels.  GDP is set to slow to 1.9% in 2025 (lower oil prices) before rebounding to +3.1% 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 around 23% 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 come under criticism from FATF for not doing enough to investigate and prosecute money laundering and terrorist financing.

Lebanon (LBN)

Overall risk in Lebanon remains high. Former army chief, Joseph Aoun is now President, after being elected by parliament in January, ending a two-year period without a proper government in Lebanon due to the presence of Hezbollah supported by much of the Shia population in the country and backed by Iran. The decision has been backed by the likes of the US, France and Saudi Arabia. Nawaf Salam has been tasked with role of Prime Minister having secured backing of 84 of the 128 parliament lawmakers. A move highlighting Hezbollah’s weakness after their war with Israel. The new government will need to rebuild and they aim to do so by gaining international aid and support. Despite a 60-day ceasefire at the end of 2024 between Israel and Hezbollah, strikes into Beirut have resumed after Israel claimed it had intercepted rockets fired over the border. The ceasefire deal was extremely fragile, given both sides claiming each other were breaking the agreement such as Israel delaying their withdrawal of troops in southern Lebanon and Hezbollah not removing all of its weapons in the region. In addition, tensions on the Syrian border have also intensified with conflict between Hezbollah and the Syrian army breaking out since the toppling of the Assad regime in Syria, a ceasefire has since been agreed. Political violence and legal & regulatory risk are both very high. Conflict has caused destruction in Beirut and southern Lebanon, killing and displacing thousands. Security concerns have halted any previous progress in industries such as tourism and more people are living below the poverty line and having difficulty accessing essentials. Supply chain disruption remains high.  Inflation hit 45.2% in 2024 while the economy contracted by -7.5%. The current account deficit also widened to -18.2% of GDP as Lebanon have suffered from a weaker Lebanese pound as well as poor monetary and fiscal policy (such as taxes of imports causing a liquidity crisis). The World Bank have granted Lebanon 250 million USD worth of support aimed at supporting the country’s power outages caused by war with Israel last year. They will also benefit from the World Bank’s reconstruction programme, worth 400 million USD. However, a World Bank report has stated Lebanon are in need of 11 billion USD worth of recovery and reconstruction funds. Lebanon will call on Saudi Arabia to resume 3 billion USD worth of aid to the Lebanese army. After sovereign debt default in 2020, Lebanon is aiming to continue to seek debt restructuring agreements with the IMF and their main creditors, now they have greater and more sufficient aid support. Since the election, Lebanese bonds have rallied, with greater hopes of improved stability in the country and the hope that Lebanon would begin dealing with their economic problems. They do however, remain some of the cheapest bonds in the world and uncertainty caused by the resumption of war will continue to be the main concern. Sovereign non-payment risk is medium high and the risk of doing business remains high.

Morocco (MAR)

Overall risk in Morocco remains medium. Aziz Akhannouch remains PM after his narrow 2021 election victory. House of Representative elections are set for 2026. Political interference is medium, while legal & regulatory risk remains medium high. The political background remains largely stable in Morocco, despite rising discontentment from parts of the population over numerous issues such as high unemployment as well as the cost of living. Relations have been strengthened with the US as well as EU countries France and Spain over the recognition over their sovereignty of an area in the Western Sahara. However, this is an issue which has been fuelling tenser relations with Algeria. A concern however from the EU does continue to be immigration. African migrants looking to come to Europe are taking extremely dangerous routes from Morocco, in the attempt to reach Spain, thus causing fatalities in the process. The EU and Morocco are looking to work collectively to tackle this issue, including financing support. The IMF anticipate 3.9% growth in 2025 and 3.7% growth in 2026. Growth will be supported by a variety of different sectors. Manufacturing remains strong and tourism is at record highs. In 2024, the number of tourists increased by 20%, reaching 17.4 million tourists. They aim to welcome 26 million tourists by 2030 ahead of the World Cup held jointly with Spain and Portugal. Tourism is now a vital part of the economy, becoming a key sector for employment accounting for around 7% of the economy. Growth in infrastructure and green energy projects remain key drivers for investment and growth. The government have approved 32.5 billion USD worth of green hydrogen projects. Other key projects include the expansion to Casablanca Airport, a 10 billion USD rail expansion including a high-speed line to Marrakesh as well as expansions to LNG pipelines particularly into Europe. The current account deficit does remain high at -2% of GDP for this year, according to the IMF. Import demand is at high levels mainly attributed to capital goods for infrastructure projects. In addition, agriculture will remain the most important sector in the Moroccan economy accounting for around 15% of the economy. Severe droughts seen in recent years continue to put it under significant pressure, as unemployment has widened to 13.3% and 36.7% amongst young people. The government have pledged 1.4 billion USD of support to boost youth unemployment and job creation. Supply chain disruption remains medium as the risk of doing business stays medium low. Meanwhile, fiscal reforms and the expansion of the tax base have been made in efforts to reduce the public deficit. Public debt to GDP will be 68.9% of the economy in 2025, according to the IMF. The budget deficit is expected to improve and remain consistently below 4% of GDP in the coming years, however the extension of some agricultural subsidies until the end of the year and high spending on infrastructure and social programs will extend IMF pressure to cut debt. The IMF forecast 2.2% inflation this year, after a 0.6% rise in prices in 2024. Sovereign non-payment risk is medium high and exchange transfer risk remains at a medium level.

Oman (OMN)

Overall risk in Oman remains at a medium level. Sultan Haitham bin Tariq Al Said remains head of state as he has done since the death of his cousin Sultan Qaboos in 2020. Political violence, political interference and legal & regulatory risk all remain medium. Despite war and conflict in the Middle East, Oman continues to act neutral in their foreign policy stance. Oman have staged US-Iran nuclear talks and helped mediate a ceasefire deal between the US and the Houthis in the Red Sea and the Bab al-Mandab Strait. Relations with Saudi Arabia, Iran and the West all remain positive. Oman’s oil dependent economy will grow by 2.3% in 2025 and 3.6% in 2026, according to the IMF. Oil production is anticipated to rise, given OPEC+ ending production restrictions, however lower oil prices will impact export revenues. The current account is expected to fall into deficit this year for the first time since 2021 as the IMF anticipate the current account to hit -1.5% of GDP. Oman’s oil reserves are under pressure, thus efforts continue to be made to diversify into LNG and tourism as well as expand the private sector. Oman’s vision 2040 highlights the desire to grow non-hydrocarbon sectors. As a result, import demand has increased to bolster capital for infrastructure and transport spending aimed at better connecting Oman to other Gulf states. The government debt to GDP will continue to decline according to the IMF, reaching 35.4% of GDP in 2025 and 33.9% of GDP in 2026. Despite lower oil and energy prices impacting revenue, new taxation measures have been taken to further reduce dependence of oil revenues. Oman have introduced a 15% minimum top-up tax on multinationals and new incomes taxes, higher for expatriate workers. The country’s ‘Omanization’ policy will continue to incentivise companies to take on Omanis in the prominent roles in the labour market as Oman have been reliant on expatriate workers in recent decades. The inability of the government to provide fiscal stimulus is medium low, while sovereign non-payment risk remains medium. The Omani Rial OMR remains pegged to the USD at OMR 0.38 to 1 USD. Exchange transfer risk remains medium low, as prices are expected to remain stable with the IMF forecasting 1.5% inflation in 2025 and 2% inflation in 2026. The risk of doing business is medium low. 

Syria (SYR)

Overall risk in Syria remains very high, along with political interference and legal & regulatory risk. After December saw the end of the Assad regime, Ahmed al-Sharaa is president leading the new transitional government after he was sworn in March. He is aiming to improve ties with the West and open up the Syrian economy. Sharaa will try and rebuild Syria and pave the way for elections, a 5-year process outlined by the new temporary constitution. Political violence is still very high as sectarian violence continues to be a major threat, for instance between pro-government and pro-Assad forces who both remained heavily armed as the new administration is having difficulties uniting their armed forces. In addition, Syria have suffered from Israeli air strikes, as violence persists between Sunni Islamists and the Druze in the south of the country. The Israeli government have called out the new Syrian government as jihadists and have deployed their forces in the South West of the country. In addition, Hezbollah presence in the country remains a concern and has caused for violent clashes on the Lebanese border. With conflict persisting and despite efforts progress to rebuild the economy, poverty and food insecurity remain high and Syria are suffering severe power outages. 90% of the population are believed to live under the poverty line. USAID termination of emergency food assistance will apply further pressure. The Syrian economy has suffered heavily from sanctions imposed from the West which alongside war have collapsed their economy (once dependent on oil revenues as well as the agriculture and tourism industries, making them now heavily reliant on expensive energy imports). However, after meeting President Trump in Riyadh in May, the US will lift sanctions on the country, which will allow Syria back into the global financial system and give them greater ability to access humanitarian support, meanwhile the US will reduce the number of its troops in the region. In addition, the UK and EU have also removed some sanctions. While Assad-backed Russia are now winding back involvement in Syria, Putin has said he is willing to offer ‘’practical cooperation’’ as Russia remain concerned by continued violence.  The new administration is also making efforts to stabilise the fiscal situation and stabilise the Syrian pound, which has spiralled due to war and the toppling of the Assad regime in December. The Syrian pound which was at 47 SYP to the USD in 2011 is now at around 11,000 SYP to the USD. The new central bank governor has pledged a unified exchange rate for the SYP. It is believed that the central bank holds around 200 million USD worth of foreign currency reserves down from 18.5 billion USD when civil war broke out in 2011. The government has said it owes between 20 and 23 billion USD mainly in bilateral loans. However, Saudi Arabia and Qatar will settle Syria’s 15 million USD worth of outstanding debt to the World Bank to allow it to access greater finance as it navigates a path to reconstruction of areas, destroyed by years of conflict. Sovereign non-payment risk and now exchange transfer risk are both very high. On top of the lifting of sanctions, greater support and aid has been offered by a variety of different channels. For instance, a UN support programme offering 1.3 billion USD over 3 years for infrastructure as well as an EU conference has pledging 6.3 billion USD to help the new government to face their ongoing humanitarian crisis. Alongside, great cooperation with the likes of Turkey over working on an oil pipeline connecting the two countries. The risk of doing business remains very high, while supply chain disruption remains high.

Turkiye (TUR)

Turkiye’s overall risk level remains high, with no changes in any of risk levels in this reporting period. The political tension in the country remains high, particularly after Istanbul mayor Ekrem Imamoglu was arrested late March due to fraud allegations, leading to political violence (currently very high) due to nationwide protests against the AKP government. Political interference is at medium-high level while legal & regulatory risk also stands at medium-high. In addition to domestic political issues, the accession negotiations between the EU and Turkiye remain halted as European Parliament maintained a block on restarting Turkey accession talks on May 7, 2025. On the economic front, Imamoglu’s arrest and Turkish Lira fall significantly risked the ongoing disinflationary process adding uncertainty to fragile investment climate in Turkiye, despite there were some recent signs that Turkish economy was recovering. Imamoglu's arrest led to financial market volatility, stocks and the national currency plummeted. The EBRD estimated in May Central Bank of Turkiye (CBRT) sold more than USD40 billion in foreign exchange in the weeks following Imamoglu's arrest. Despite these problems, the banking sector vulnerability is currently at medium-low level, showing the relative strength of the banking system supported by Turkiye’s removal from the Financial Action Task Force (FATF) gray list which was a remarkable development for Turkish financial sector – though the banking sector is still exposed to Turkiye's heavily indebted private sector. The risk of doing business now stands at a medium level due to concerns over law enforcement and political uncertainty. Remaining the core economic problem, inflation hit 37.9% y/y in April with education and food prices led the rise in the index, which will likely require CBRT to maintain a tight stance for a longer period than expected. There are still low foreign-exchange reserves relative to external short-term debt while a large gross external financing requirement and vulnerability to external shocks exist. Inability of government to provide stimulus remains medium-high due to financial constraints. The supply chain disruption risk is at high level as the country struggles due to the regional conflicts in Syria and Ukraine.

West Bank/Gaza (PSE)

Egypt and Arab countries idea of a reconstruction of Gaza with a safe zone for Gaza residents during building is an alternative to President Trump’s plan for Gaza residents to move to Egypt and Jordan.   However, Israel’s final decision will take account of domestic priorities in Israel, especially as Israel’s opposition to a two-state solution also remains a red line.  The process will not be smooth either given the current Gaza escalation and the Arab countries idea will be rejected. The U.S. and Israel are also reluctant to provide money for Trump’s plan. Overall, the economic recovery and rebuilding will likely be delayed for years in Gaza. West Bank tensions could also intensify. Some political pressure in Israel exists to officially annex parts of the West Bank in 2025 with a friendly Trump administration in the White House; Hezbollah having recently been defeated; Assad removed in Syria and Iran now weaker in the region.  This could risk increased violence between Israeli settlers and Palestinians and a greater Israeli military presence in the West Bank, 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 at high could worsen in the coming quarters.

Yemen (YEM)

Overall risk in Yemen remains very high. Rashad Muhammad al-Alimi leads the country acting as chairman of the Presidential leadership council since 2022, while Salem Saleh Bin Braikas is now prime minister after previous PM Ahmed Awad bin Mubarak resigned. Political violence, political interference and legal & regulatory risk are all deemed very high. The role of the presidential council remains to end civil war and bring about a ceasefire with Iran-backed Houthis who continue to control most of the country. As war in the Middle East has intensified, Yemen have been under greater threat of attacks from Israel as the Houthis have been responsible for drone and missile attacks in Tel-Aviv this year. In addition, Yemen have also suffered a series of deadly US strikes in response to Houthis attacks on US ships in the Red Sea and the Bab al-Mandab Strait. The US have claimed it has struck over 1,000 targets in Yemen in this operation, including a significant set of strikes on the Ras Usa fuel port which had said to have killed at least 74 people in April. A ceasefire has since been reached between both sides, mediated by Oman. The US have also placed heavy sanctions on those delivering oil and gas to the Houthis. Houthis attacks have considerably affected international shipping from the Indian Ocean into the Suez Canal. The IMF forecast a -1.5% decline in real GDP in 2025. High levels of poverty and food insecurity persist in the region due to the impacts of the relentless conflict. 17 million people are facing food insecurity and 18 million lack access to drinking water, according to the World Bank. Crude oil exports remain blocked. As a result, the Yemeni Rial (YER) continues to plummet, adding enormous price pressures to necessary imports, while receiving insufficient humanitarian support. Inflation is thus set to remain extremely elevated at 20.4% in 2025, while the current account deficit will remain significant at -12.1% of GDP, according to the IMF. Sovereign non-payment risk is now high, alongside exchange transfer risk. Climate issues will also pose a further risk to economic activity as supply chain disruption risk remains very high. Despite, a ceasefire between the Houthis and the US being agreed, this does not include Israel and thus attacks on both sides will remain a major risk as Israel have intensified their war effort and continue to retaliate to Houthis attacks on Ben Gurion airport in May with a new set of strikes. The risk of doing business remains very high. 

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