One of the most happening global markets is the Middle East. The Middle East is a diverse region economically and in terms of market forces with national economies ranging from hydrocarbon-exporting rentiers to centralized socialist and free-market economies. The region is best known for oil production and export, which significantly impacts the entire region through the wealth it generates and through labour utilization. In recent years, many of the countries in the region have undertaken efforts to diversify their economies.
An International Monetary Fund (IMF) analysis of growth determinants indicates that greater integration with international markets could provide a substantial boost to
income and gross domestic product (GDP) growth.
Noting trade openness as” significant contributor to higher productivity per capita income growth”, several countries in the Middle East have accomplished the common
goal of trade reform and openness.
The economy of the Middle East consists of the economies of Azerbaijan, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates (UAE), and Yemen. Middle Eastern countries have increasingly attempted to diversify their economies, particularly the oil-exporting countries. The countries of the Gulf Cooperation Council (GCC) have addressed this issue and have taken a strong stance in the implementation of reforms. In order to decrease resource dependency within the Gulf states, reforms and policy proposals for the future have been implemented and follow a plan of economic development, signalling the move from natural resources to a globally-integrated diversified economy hoped to attract foreign investment. Examples of such plans to diversify include Saudi Arabia Vision 2030 and the United Arab Emirate Economic Vision 2030, each of which outline the country goals to reach the desired level of economic growth and development by 2030.
The major factors driving the market in Middle East Asia (MEA) are rise in government investment, growth in technology and population, and the increasing need for industrial growth. Reforming regulatory regimes and the urgent need for industry growth are the prominent factors driving the consistent demand in MEA. Sectors such as transportation, power, water plants, and property constructions are the opportunity drivers, owing to the high investments aided by the government. Subsequently, we shall delve into some of the other factors that have significant impact on the growth of the Middle East zone.
Population growth: The high rate of population growth in this zone has been impacting the economic growth in the Middle East. The rate has been found to be 3% on an average. This means that in any given state, within a time span of 20 to 30 years the population will double. The population rate puts undue stress on the natural resources of the state. The region has to struggle to provide access to clean water, sanitation, food, health care, education and jobs. This in turn will have an impact on the overall economic growth of the region.
Oil: For any other country or zone, natural resources would have been the category but for the Middle East, Oil was something that built them. The rise in oil prices gave the benefit of heightened revenues for the countries in the zone. They earned in the form of high exports. But with the oil prices tumbling in 2020, which is one of the major economic drivers in the zone, their economy was almost collapsing. Saudi Arabia, the country responsible for the oil reserves is now slowly focusing its energies elsewhere since they know their oil reserves are numbered.
Renewables: Some of the progressive governments of the Middle East have taken substantial efforts to expedite investments in renewables that include solar and biofuel. The climate change has posed a threat which has made businesses adopt renewable investments in such a way so that they are at the heart of the business strategies. The region gets abundant sunshine, and now the focus is gradually drifting towards renewables to attract more investments in a world where climate change has become a serious threat to be battled with united efforts.
UAE: Forecasts suggest that by 2050, up to half of the UAE’s required energy will come from renewable sources, of which solar is expected to make up a large percentage.
There can also be limits to energy generated by the hybrid source to prevent excess utilization. By 2050, fossil fired plants will become more environmentally compatible, reduced to their key function of peaking demand. The availability of resources will be prolonged for centuries, and the expensive and energy consuming carbon dioxide sequestration will no longer be needed. These examples demonstrate that solar power is technically viable in the Middle East and will achieve its desired impact over the next couple of decades when implemented.
The Geopolitical fog: The middle east region has an overly complex social, geopolitical and social order. This trend has always increased the income disparity among various countries of the region. This one factor is leading to disbalance in the economic stability. For years, the tensions plummeting in the region has caused distress, led to reforms, but this continues to be a driving force in the zone.
The above factors primarily summarise the impacts on the economy of the Middle East but apart from these there are many more factors like infrastructure, migration, culture and sectarianism that drives the economy of the region and every day reshaping the future growth of the Middle East.
By Priyanka Sharma, AGM- Sales & Marketing, Navitas Solar