Don’t use a single oil brush to paint your market assumptions for 2023. Accurately sizing the opportunity will be more important than ever as resources remain tight.
The Middle East North Africa region is once again vulnerable to global headwinds. With inflation showing no signs of cooling and capital maintaining its one-way flow towards US safe havens, MENA markets will enter 2023 with cost pressures, FX volatility and fiscal risks at elevated rates. In addition to operational challenges, the slowdown in EU markets asks MENA executives to generate stronger performances in Saudi Arabia and the UAE to make up for weaker activity in Europe and other slowing major markets.
The oil-exporting GCC—led by Saudi Arabia—will see the most investment attention as well as growth expectations from firms, leading to rising competition. Amassed oil revenues will drive investment, as new projects enter implementation phases. However, markets that were touted to support the region’s portfolio, such as Iraq, Egypt and Morocco regressed markedly in 2022 under fiscal and currency pressures and will remain a difficult operational environment for businesses across most of 2023.
Executives need to play the field carefully as they look to capitalize on sparse pockets of opportunities to protect their margins and financial standings at a time when costs will remain high, price sensitivity (even in UAE and KSA) extends and customs, importation and capital regulations change overnight. Expect consumers to be more reactionary to price hikes and prioritize out-of-home consumption instead of big-ticket purchases. In the B2B space, industries that are backed by public projects and initiatives such as energy (legacy, green and renewable), logistics and food production will generate a significant portion of business activity in 2023.
FrontierView recommends that MENA executives consider the following tactics:
- Collect insights from the ground to strip away the inflated oil-economy GDP noise
- Carefully consider the medium-term cost assumptions when drawing out your price strategy
- Redesign your compensation package to ensure recruitment is lucrative amidst the ongoing talent war
- Evaluate your supply chain resilience, carefully allocating supplies across your markets
Though the operating environment looks difficult and financial risks are running high, 2023 provides a useful opportunity to explore your long-term localization strategy, review your product portfolio in rapidly evolving markets and build capabilities that support you in capturing the recovery through new products, strong customer relationships, and marketing prowess.
Download an Executive Summary of the MENA Outlook for 2023
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