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Middle East Economy Watch - February 2025
2024 has seen relatively positive economic developments for countries in the Middle East not directly involved in the Gaza crisis. However, the year has still been challenging for the region, with the economic impact of the conflict extending to neighbouring countries. In June, OPEC+ overcame internal tensions and agreed to extend its cooperation agreement at least through 2025 and a further adjustment was made in September, reflecting renewed supply-demand dynamics in the oil market. Additionally, non-oil sector growth indicators look solid this year. Fiscal outturns have also been positive so far, with the UAE, Qatar and Oman achieving surpluses and Saudi Arabia narrowing its deficit. In this report, we also explore two themes in detail. First, Egypt has experienced a remarkable economic turnaround this year, following a US$35bn investment from the UAE. This has enabled the implementation of important reforms, including a liberalisation of the currency regime, which has helped to bring down inflation. As a result, Egypt has managed to unlock additional funding support from multilateral institutions and a more positive view from the market, leading to lower government debt yields. However, significant challenges remain, including the ongoing disruption to trade through the Suez Canal and persistent challenges with poverty and underemployment.