After the dual shocks of COVID-19 and the oil price crash, Middle East & North Africa (MENA) economies are likely to stabilize in 2021. Yet, the recovery pace will vary significantly across sectors and countries, and improvement in demand will not be consistent, especially in the first half of 2021. Even in outperforming markets, such as Egypt and Saudi Arabia, operating environments will remain complex, while political and economic challenges will mute opportunities in Lebanon, Iran, Iraq, and Algeria.

Proactive portfolio management will require firms to maximize the opportunities in moderately growing markets, such as Qatar, the UAE, Morocco, and Kuwait. Executives operating in MENA should focus on integrating scenario building, increasing local teams’ flexibility, investing in local team training, especially around digital customer engagement, and adapting the offering to the longer-term shifts in customer behavior.

Most MENA countries return to pre-COVID levels in 2022. Total economic activity will gradually recover throughout next year, with more substantial improvements seen toward the end of 2021. The risk of governments rapidly changing quarterly spending plans, fluctuating consumer spending and behavior dynamics, and risk of returning localized restrictions will all influence business opportunities in 2021, requiring firms to closely monitor short-term COVID-19 and economic dynamics, and adjust tactics rapidly.

Beyond growth, numerous factors will shape the operating environment. Rising manufacturing localization, falling expat populations, changes in taxation, a varying pace of tourism sector recovery, and continued divergences between sectors in terms of their performance will continue to shape the business environment in the MENA region. Beyond demand-growth dynamics, firms will need to integrate changes in their operating environment into 2021 plans.

Scenario analysis must be used to predict 2021, while key risks must be integrated to budgets. Businesses will need to align on key assumptions driving their budget numbers for 2021, integrating key political and policy risks ahead for the business. COVID-19 and the ensuing economic ripple effects have increased population discontent across the region—and raised the importance of centralized economic planning.

Actions for Business Professionals

  • Increase local teams’ flexibility to revise commercial expectations as well as sales and customer engagement tactics, as the 2021 MENA outlook remains highly uncertain and will be driven by a fluctuating (rather than a gradual but consistently improving) demand outlook.
  • Use scenarios to align both your distributors and corporate headquarters on the specific assumptions driving current 2021 budgets.
  • Prepare action plans for how your business would respond if oil prices do not increase to our base case of US$ 50 on average in 2021, up from this year’s US$ 40.

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