One quarter into 2025, the uncertainty most people cited at the beginning of the year is far from dissipating. As US President Donald Trump continues his trade war, upheaving markets and threatening rising inflation, markets are becoming less certain about the way forward for both fiscal and monetary policy. Interest rates look to be staying higher for longer, and it’s looking increasingly likely for trade wars to erupt as the US hikes tariffs on China and other countries under Trump’s rule.

Despite the expected headwinds, the Middle East region enters the year in a good place. Diversification is still the name of the game for the biggest economies in the GCC, with Saudi Arabia and the UAE both pushing ahead with major infrastructure projects and investments in the non-oil sector.

We spoke with Chiradeep Deb, Mashreq’s head of international banking, to get his insights into what’s in store for the region’s booming capital and debt markets against this backdrop of potential headwinds and global change. We also asked him about Mashreq’s goals for debt arrangements and more in the year ahead, his thoughts on AI in investment banking, and more. Edited excerpts from our conversation:

Enterprise: Do you see global headwinds like tariffs and escalating geopolitical tensions trickling down to affect regional markets?

Chiradeep: Despite the geopolitical tensions in the neighborhood, the region has held its own. Fund raising through capital markets and syndicated loans for regional borrowers are now at an all-time high. This augurs well for the banks in the region as they go about expanding their balance sheets. Eventually, the direction of oil prices is going to define how the region performs against the backdrop of global changes. A price of USD 70/80 or higher for oil is the most desirable place to be in.

On the downside, Trump’s new tariff policies [could be] inflationary in the short term and as a counter measures, rates will have to remain higher for longer. It could very well lead to the region dealing with recessionary trends in global markets towards the end of the year

If this were to happen, then this region is in for some level of real volatility, and the countries in particular who could potentially get affected are the likes of Bahrain and Egypt. Saudi Arabia, given its pipeline of gigaprojects, will be under some pressure as the break-even price heads towards the upper-80s.

The UAE, on the other hand, is very well managed. Dubai is no longer a levered story. Prudent financial management over the past decade has helped the debt to GDP ratio in the 120% during the global financial crisis to settle down to the 20-30% range.

I think the region remains quite resilient, with mostly bright pockets. There are a few countries and its wall of debt maturities to worry about, but in the grand scheme of things, we are better off than where we were in previous crises.

E: What are the biggest trends you expect to see in the region’s debt markets this year?

CD: Where in the past couple of years, new projects have been primarily driven by sovereigns and government-related entities due to limited capex spending for the private sector amid a higher interest rate environment, I expect this trend to start to reverse, with more private sector participation expected if interest rates start coming down.

2025 is probably not the year where you’ll see this fully coming through; you’ll have to wait another 12 or 18 months for a significant interest rate reduction.

What we’ve also seen is that capital markets have overtaken loan markets. Loan markets have been pretty flat in the last three or four years, despite the growth of the regional economy. This region has seen an encouraging number of high yield debt issuers accessing markets.

The influx of global asset managers setting up shops in the region is another encouraging development. They are not only looking at putting money in the UAE or Saudi Arabia. When they set up shop here, they’re looking at diversifying and looking at the region as a whole.

Private credit is the new buzz word in the region. Before 2025 comes to an end, [I think] we will see enhanced participation in this specific asset class. We will have some regional institutions setting up private credit funds dedicated for deployment in the larger region.

E: What new geographies is Mashreq pushing into this year?

We now cover more than 30 countries globally from a debt origination perspective. Some of the recent successes have been in Commonwealth Independent States and Central European countries. Over the last 12 to 18 months, we have closed more than USD 700 mn syndicated loan facilities for banks out of CIS. European banks have been going through a rough time in terms of risk appetite and return criteria, so these markets have been looking to diversify their lender pool.

We at Mashreq were the first from the Middle East to be involved in capital markets issuances for some of the big Uzbek and Kazakh banks and sovereigns, and we’ve also been met with success in Armenia, Azerbaijan, and Georgia. We always try to bring banks from frontier markets into the Middle Eastern liquidity pool, be it loans or capital markets.

We like to originate opportunities and bring them to other banks in the region and in our global distribution network. We are constantly in dialogue in order to share a part of the risk that we originate — this allows us to be in B or B- markets that we believe we should be present in on a long-term basis.

E: Are you a boomer or a doomer on AI? How is the team using it right now, and how do you see it being used in the future?

I am a big supporter of trying to work with AI in our daily work life. While it is not perfect to start with, some initiatives that we persisted with have helped us embed homegrown AI models into our distribution model. Our ability to target investors with high probability of conversion has helped us to drive up volumes. We have taken the volume to fourfold in three years….and that growth can largely be credited to AI.

Risk appetite of counterparties (i.e. risk participants) are constantly being monitored by the AI models. Within seconds, the model directs you to the price point at which they would be likely to buy a new asset, the likely maturity of deals, and arms you with information you need to formally reach out to them. That saves us the time and we use that to build relationships and have meaningful conversations with investors to expand the business.

E: What’s the biggest opportunity for Mashreq in 2025 as a business?

The opportunity for Mashreq is to deepen its relevance with our client base. While most competing institutions are extending larger balance sheets on transactions, we believe Mashreq is different due to the continuous ideation. Our clients like us for the innovative solutions we offer. Our growth will come from mandates from newer markets as we anchor one country / region after the other.

The regional financial ecosystem of market participants is growing fast and banks like Mashreq by the very nature of the deals we undertake leave an imprint with the new practitioners moving to the region. Reaching out and striking agreements with financial sponsors, private credit, fixed income asset managers, and family offices are all part of that mix.

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