Middle East firms look to boost trade, supply chain resilience, and non-oil economy in 2024

Regional economies are doubling down on diversification, supply chain resilience, and expanding trade ties with new markets in 2024, according to Economist Impact’s Trade in Transition 2024 Middle East Regional Insight report (pdf). Executives from the Middle East are optimistic for the year ahead, citing improvements to trade. The report surveyed the region’s industry leaders on their trade and supply chain strategies, as well as their sentiments.

The Middle East is expected to see 2.3% growth in 2024, as gains from a favorable global commodities market boost firms’ output and boost demand. The region’s exports are also expected to grow some 3.8% in 2024, coming third after Asia-Pacific and Africa, with some 42% of firms surveyed citing growing demand as driving an increase in exports. Imports are also expected to grow 4.6% this year, as firms intake more inputs to meet growing demand, with 41.7% of firms citing higher outputs as the chief driver for their imports. Boosted output due to technology upgrades and higher efficiency due to digitized supply chains were cited by respondents as secondary drivers for imports, the report said.

Diversification on the agenda: Windfall gains from hydrocarbon exports set to diversify the region’snon-oil economy. The GCC is leveraging these returns to develop new export-oriented businesses in the technology, logistics, tourism, and renewable energy sectors. The UAE saw a 14.4% y-o-y increase in non-oil trade in 1H 2023, with KSA also working to attract FDI to develop its non-oil economy, the report said. As the region’s firms diversify their outputs, they are also looking to expand to new markets, with 33% of respondents citing operations in new markets as being the chief driver for their exports in 2024, the report explained.

Strengthening supply chains: 43% of firms surveyed have indicated that they are diversifying their supply chains and working with more suppliers across the world in a bid to “hedge against disruptions and enable faster times to market,” the report said. Middle Eastern firms are also boosting inventories to safeguard against shocks, with 45% of executives implementing one to three month buffers in their supply chains, the highest among all regions.

Middle Eastern firms are also leveraging an “agnostic geopolitical stance” to develop trade ties that are unhindered by trade blocs, with regional businesses engaging with China, India, North America, and other regions. Regional giants UAE and KSA are also pushing for more trade accords with a wide range of countries, the report said. Firms were highly supportive of government efforts to open trade, with 63.1% citing multilateral reductions to trade barriers and regional trade agreements as supporting their supply chain strategies.

Which regions are expected to be the Middle East’s largest trade partners this year? 43.7% of firms indicated that they expect the GCC market to contribute most to their export revenues in 2024, followed by China (31.1%), with the Middle East (excluding the GCC) and India tying at 28.2%. 37.9% of respondents expect to source the largest proportion of their imports from China, followed by India (32%) and Europe (25.2%), the report explained.