RIYADH: Stock markets across the Middle East and North Africa began 2025 on a strong note, with the Arab Monetary Fund Composite Index rising 4.37 percent year over year, according to a new report.

On a quarterly basis, the index — which tracks the performance of 16 Arab stock markets— posted a 1.55 percent increase, reflecting investor confidence amid shifting global monetary policy and geopolitical headwinds.

The figures were released as part of the AMF’s quarterly bulletin, which noted that sectors such as banking, real estate, and basic materials, as well as transportation, and financial services performed well, contributing to gains in several markets. 

The strong performance comes amid reforms across Arab markets to deepen liquidity and attract foreign investment. Saudi Arabia’s Capital Market Authority is advancing its 2024-2026 strategy to elevate its global market position and enhance investor safeguards, while Abu Dhabi Securities Exchange recently launched the “New ADX Group”— a market infrastructure overhaul aligned with the emirate’s long-term economic vision. 

In its report, the AMF said: “This performance unfolded amid a tightening global monetary policy environment during the first quarter of 2025, as most central banks, both globally and across the Arab region, adopted a cautious approach to monetary easing following the US Federal Reserve’s decision to keep interest rates steady.”

The fund highlighted that while some Arab exchanges saw notable gains, others experienced declines. 

Casablanca Stock Exchange led the region with a 20.19 percent rise in its index, driven by strong performances in the banking and telecommunications sectors. 

Tunisia and Kuwait followed with increases of 10.25 percent and 9.66 percent, respectively, while Egyptian Exchange and Amman Stock Exchange posted gains of 7.68 percent and 6.12 percent.

However, not all markets fared as well. Saudi Stock Exchange, the largest in the region by market capitalization, saw a slight decline of 0.10 percent, while Abu Dhabi Securities Market and Palestine Exchange recorded drops of 0.53 percent and 0.46 percent, respectively. 

Beirut Stock Exchange faced the steepest decline, plummeting by 12.69 percent, attributed to ongoing economic challenges in Lebanon.

Despite Lebanon’s ongoing economic crisis since 2019, recent data from the Central Administration of Statistics shows signs of easing inflationary pressures. 

The annual inflation rate dropped sharply to 14.2 percent in March, down from 70.36 percent a year earlier — a notable improvement attributed largely to the stabilization of the Lebanese pound, which has held steady at approximately 89,500 Lebanese pounds per US dollar since mid-2023.

Market capitalization and trading activity 

The total market capitalization of Arab stock markets decreased by 1.45 percent in the first quarter of 2025, reaching $4.32 trillion, down by $63.77 billion compared to the last quarter of 2024. 

This decline was primarily due to significant losses in the Abu Dhabi and Saudi markets, which shed $18.23 billion and $75.06 billion, respectively.

In contrast, Casablanca Stock Exchange added $21.26 billion to its market value, while Kuwait Stock Exchange saw an increase of $13.77 billion. 

Trading values also reflected this mixed performance. Total trading value across Arab markets fell by 2.60 percent to $250.53 billion.  

Kuwait Stock Exchange stood out with a 45.09 percent surge in trading value, reaching $21.95 billion. This strong performance builds on 2024’s momentum, when 113 out of 142 listed companies reported profits, as highlighted in an Al-Shall Consulting report.

Meanwhile, Abu Dhabi Securities Market saw a 31 percent drop in trading value.

Sectoral performance and global influences 

Global factors played a significant role in shaping market trends, with sectors scuh as insurance, consumer services, and media faced declines. “The cautious monetary policies of most global and Arab central banks, following the US Federal Reserve’s decision to stabilize interest rates, positively impacted lending and financing stability,” the study stated. 

However, it also warned that “the escalation of US trade policies, including new tariffs, has raised concerns about slowing international trade and rising production costs, which could directly affect global growth expectations, inflation rates, and investor confidence.”

Geopolitical tensions and fluctuations in oil prices further influenced market dynamics. “Oil prices experienced significant volatility during the first quarter of 2025 due to escalating geopolitical tensions and increased production from some countries, impacting markets closely tied to oil and affecting liquidity and the performance of the energy sector,” the AMF explained.

Individual market highlights 

Saudi Stock Exchange, which accounts for 61.13 percent of the total market capitalization of Arab exchanges, saw its value drop to $2.64 trillion. The media and utilities sectors were among the worst performers, declining by 31 percent and 13 percent, respectively.

Despite the recent dip, Saudi Arabia’s capital markets remain a regional powerhouse.

Speaking at February’s Capital Markets Forum in Riyadh, Saudi Exchange CEO Mohammed Al-Rumaih said:  “2024 was a great year for us. We did more than 55 listings; around 45 in the equity market, 13 on the main market, which doubled compared to 2023, and the rest in the parallel market. It put us as No.1 not just in the region, but globally as the fastest-growing exchange in the world.”

Egyptian Exchange rose by 7.68 percent, with trading volumes surging by 27.28 percent, reflecting renewed investor confidence.  

Kuwait Stock Exchange outperformed other Gulf markets, with its index climbing 9.66 percent, supported by robust activity in the banking sector. 

Casablanca Stock Exchange’s 20.19 percent jump was fueled by gains in electricity, mining, and telecom stocks, with firms like Attijariwafa Bank and Maroc Telecom leading the charge.  

Risks and outlook 

The report cautioned that several risks could destabilize Arab and global markets in the coming months.

“Potential risks include trade-related pressures linked to tariffs, a possible global economic slowdown, rising inflation, fluctuations in oil prices, high debt levels in some Arab economies, and geopolitical tensions,” it stated.

Despite the relative stability of Arab exchanges in the inaugural quarter of 2025, these factors could pose challenges to future performance. 

The AMF also emphasized the importance of continued cooperation among Arab markets to enhance integration and support economic growth in the region. 

“The Fund hopes that these efforts will contribute to developing cooperation and integration among Arab financial markets, serving common interests and promoting economic growth in the Arab region,” the analysis concluded.

RIYADH: Short-term gains in non-oil sectors are expected to help Gulf Cooperation Council countries offset the negative impact of prolonged OPEC+ crude production cuts, according to an International Monetary Fund analysis.

In its latest report, the organization projected that the economy of the GCC region will grow by 3 percent in 2025, accelerating to 4.1 percent by 2028.

The analysis affirms the progress of the economic diversification journey adopted by the group’s member states, including Saudi Arabia and the UAE, which aim to strengthen their non-oil sectors and reduce their decade-long reliance on crude revenues. 

“In the GCC, robust non-oil activity linked to diversification efforts helped to offset the negative impact of extended OPEC+ production cuts,” said Jihad Azour, director of IMF, Middle East and Central Asia Department. 

To maintain market stability, OPEC+ has been cutting output by 5.85 million barrels per day, equal to about 5.7 percent of global supply, since 2022. 

In March, the oil producers’ alliance decided to proceed with a planned April oil output increase, with a monthly rise of 138,000 bpd.

Regional outlook 

In the latest report, the IMF projected that the economy of the Middle East and North Africa region will expand by 2.6 percent in 2025 and 3.4 percent in 2026. 

In its previous projection made in October, the IMF had forecasted MENA economies to grow by 4 percent in 2025 before accelerating to 4.2 percent the following year. 

“We expect growth to pick up in 2025 and 2026, assuming oil output rebounds, conflict-related impacts stabilize, and progress is made on structural reform implementation,” said Azour. 

He added: “However, the projections have been lowered compared with October 2024, reflecting weaker global growth, lower oil prices affecting oil exporters, still-lingering conflicts, and a more gradual resumption of oil production than we had expected after the extension of OPEC+ voluntary oil cuts.” 

The IMF said the Kingdom’s economy is projected to grow by 3 percent in 2025 and 3.7 percent in 2026. 

The projected economic growth of Saudi Arabia in 2025 is higher than that of its Arab neighbors, including Qatar, Kuwait, Oman, and Bahrain. 

According to the analysis, Bahrain is expected to witness a gross domestic product growth of 2.8 percent in 2025, followed by Qatar at 2.4 percent, Oman at 2.3 percent, and Kuwait at 1.9 percent. 

In December, a report by Mastercard Economics projected that the Kingdom’s economy is expected to witness an expansion of 3.7 percent in 2024, driven by growth in non-oil activities. 

Affirming the growth of Saudi Arabia’s economy, in March credit rating agency S&P Global raised the Kingdom’s rating to “A+” from “A” with a stable outlook underpinned by the ongoing social and economic transformation in the country. 

The IMF said that the economy of the UAE is expected to grow by 4 percent in 2025 and further accelerate to 5 percent in 2026, making it the highest-growing economy in the GCC region. 

The organization added that inflation has been trending down for most economies and is projected to generally remain within established targets over the medium term.

In April, the World Bank projected that the real GDP of the MENA region is projected to rise 2.6 percent in 2025 and 3.7 percent in 2026. 

In its analysis, the World Bank attributed this projected growth to the easing of OPEC+ production cuts, a rebound in agricultural output across oil-importing economies, and resilient private consumption.

Tackling challenges

In the report, the IMF outlined various challenges that could dampen growth prospects, including trade tensions, geopolitical conflicts, and climate shocks. 

“Our analysis shows that persistent spikes in uncertainty triggered by global shocks are associated with large output losses in the MENA region: if the sharp rise in global uncertainty observed so far in 2025 continues, it could lead to output about 4.5 percent below its original trend for the average MENA economy after two years,” said Azour. 

The IMF official added that geopolitical tensions could disrupt trade, tourism, and supply chains, and increase refugee flows. 

He further said that the MENA region remains vulnerable to extreme weather events, including droughts and floods, which could negatively affect economic growth.

“Reduced official development assistance could have serious economic and humanitarian consequences, especially for the region’s low-income countries and fragile and conflict-affected states,” said Azour. 

He added: “There are also some upside risks. The swift resolution of conflicts and accelerated implementation of structural reforms could improve regional growth prospects substantially.” 

Azour also urged policymakers to adopt steps that could help shield their economies from worst-case scenarios and prioritize safeguarding macroeconomic and financial stability. 

He cautioned countries facing high inflation rates to maintain a prudent monetary stance until inflation expectations are firmly anchored.

Azour urged countries in the region to maintain adequate levels of international reserves should be preserved; where exchange rates are flexible, which could help them absorb economic shocks. 

“In the near term, an important way to create policy space is by strengthening institutional frameworks for fiscal and monetary policy,” said Azour. 

He added: “Implementing credible medium-term fiscal frameworks and fiscal rules, along with reinforcing central bank independence, will help anchor expectations and enhance countries’ capacity to navigate uncertainty.” 

The IMF official also asked countries in the region to continue their economic reforms, adding that ongoing challenges are not a reason to delay their transformation programs. 

He added that these initiatives require improved governance, the development of a dynamic private sector, and the creation of strategic trade and investment corridors both with other regions and within the MENA region.

“Delay can be costly when the world prospects are uncertain, and change is fast. Instead, countries should accelerate the long-discussed structural reform agenda to reduce vulnerabilities to shocks and seize opportunities arising from the evolving global trade and financial landscape,” added Azour.