In the latest in its series of country reports, leading trade credit
insurer Atradius has published an in-depth assessment and trading
analysis on the regions of Middle East and North Africa (MENA).
As a key export region for the UK, the report is designed to support UK businesses that may be looking for new trading opportunities and offers insight into these key markets.
Jason Curtis, commercial director for Atradius UK, said: “The Middle East is a key export partner for the UK with businesses taking advantage of growing opportunities in the overseas market. The Middle East market is lucrative and fast growing with a rising demand for products and services from the UK. However, new opportunities also bring new risks and businesses need to equip themselves with the knowledge and expertise of the local economy and trading patterns in order to protect themselves.
“Changes in political leadership, currency fluctuations and the performance of individual industries in these markets can have a major impact on the potential success of trade relationships with UK companies so global market intelligence is an essential part of doing business overseas.”
The new report by Atradius, which has trading intelligence on 200 million companies across the globe, provides a comprehensive analysis on eight major countries in the MENA region. This includes an analysis of the local politics, economy and outlook on individual industries which may have a significant impact on trading opportunities and payment risks.
Key findings from the report, which is free to download from the Atradius website, reveal:
• Negative political situation: Although stability has been regained after the 2013 coup, there has been increased repression, restrictions and demonstrations. Parliamentary elections were due to be held in March and April 2015 but were postponed indefinitely. Internal security remains tense as the military crackdown has pushed the Muslim Brotherhood underground, risking further radicalisation.
• Improving economy: After the military coup, Egypt’s economic situation has improved and growth is expected to accelerate due to improved business and consumer confidence alongside rising investments. Reforms launched to improve the business environment such as cutting red tape and improving the legal system and attract foreign investment.
• Anticipated growth: The economy is expected to grow by 4% in 2015/16. Improved stability will boost domestic demand. Meanwhile, the government has liberalised its exchange rate regime slightly, allowing the Egyptian pound to depreciate which supports export and tourism growth. This is all good news for UK exporters.
• Industry outlooks: The best performing industries are chemicals, energy and food which have a ‘good’ outlook. The worst performing are ICT and paper which both have a ‘poor’ outlook.
• UK is a major source of import: The UK is the fifth largest importer to the UAE, accounting for 5.4% of imports.
• Foreign policy supports foreign investment: The UAE has a major interest in regional stability to encourage and ensure continued trade, foreign direct investment inflow and tourism. To achieve this, it pursues a balanced foreign policy. Political and economic relations with Europe and the US are close.
• No large scale security concerns: Air strikes against the Islamic State has increased the risk of terrorist attacks but security forces are considered competent and effective with no indication of large security concerns.
• UAE economy has diversified: 71% of UAE’s total GDP now comes from non-oil sectors. Dubai is an important hub for trade and services with oil only accounting for 5% of GDP.
• Low oil price will take its toll: Not only through lower export revenues but because it will affect Dubai as a service provider – for tourism, trade and investments.
• Infrastructure spending to support growth: In Abu Dhabi, government investment is expected to continue in oil, gas and aluminium industries. Rebound of Dubai’s property market after the severe crisis of 2009 also boosted ec9onomy activity.
• World Expo 2020 provides growth opportunities: Major projects relating to World Expo 2020 in Dubai should support economic growth in the coming years.
• Industry outlooks: The strongest sectors are agriculture and energy with an ‘excellent’ outlook. All other industries are good to fair. The outlook for services, food, machines and services is ‘good’ with consumer durables, ICT and metals having a ‘fair’ rating.
• Negative political situation: The ongoing political turmoil in the Middle East is a challenge for the Saudi rulers, with major security problems due to the situation in Iraq and Yemen.
• Slowing growth: GDP is expected to slow down to 3.0% in 2015 following growth of 3.6% in 2014.
• Oil-dependent economy: Oil accounts for 93% of government revenues with decline in oil prices having a large negative impact on public finances. Government public spending increased to prevent political opposition and social unrest – but the fiscal break-even oil price to meet spending commitments is $100 per barrel but recent barrel prices are down to $65.
• Current budgets remain high: Despite oil prices, the government passed an expansionary budget for 2015 which will lead to a budget deficit of 14.3% of GDP. This can be funded by large international reserves but structural shift to a longer-term period of lower oil prices would pose a risk for the economy.
• Industry outlooks: Energy is leading the way with an ‘excellent’ outlook. All other industries remain reasonably positive. Agriculture, machines, services have a ‘good’ outlook with construction, consumer durables and textiles given a ‘fair’ rating.
(Source - Atradius Press Release)