‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?

‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?
Lebanon new goverment must implement decisive reforms to regain international trust and reintegrate into the global financial system. (Supplied)
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Updated 03 March 2025
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‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?

‘Rescue, reform and rebuild’: Can Lebanon’s new government save the economy?
  • Lebanon needs sustainable economic growth strategy focused on key sectors like technology, services, and exports

RIYADH: With a new president and a fresh cabinet, Lebanon stands at a pivotal moment. Can this government reverse economic collapse and restore trust?

The financial crisis, ongoing since 2019, has caused an $80 billion banking sector deficit, while debt restructuring remains stalled by political disputes.

The national currency has seen a 90 percent drop in value since 2019, and an International Monetary Fund delegation in May found Lebanon’s economic reforms insufficient to warrant financial aid, leading to an overreliance on foreign reserves. 

Nawaf Salam, appointed prime minister in January, used his first speech after securing the role to pledge to “rescue, reform and rebuild” Lebanon, alongside the leadership of President Joseph Aoun.

Both are facing mounting pressure to enact deep structural reforms, Fadi Nicholas Nassar, senior fellow at the Middle East Institute and director of the Institute for Social Justice and Conflict Resolution at the Lebanese American University told Arab News: “The country is emerging from financial collapse, the lingering trauma of the Beirut port blast, and over a year of war, yet time is not on its side. Trust, though quickly lost, is not so easily restored.” 

Jassem Ajaka, a Lebanese economist and professor, argues that full transparency and an independent audit of Lebanon’s financial sector and public finances are fundamental first steps. “We have not had such an audit since 2003, which is unacceptable. Without this, it is impossible to fairly distribute losses,” he told Arab News.

“Lebanon’s ability to secure economic aid and investments is deeply tied to the shifting geopolitical landscape,” said Ralph Baydoun, founder and director of research and strategic communications firm InflueAnswers. 

Baydoun explained that Lebanon must implement decisive reforms to regain international trust and reintegrate into the global financial system. 

Key priorities include robust anti-money laundering measures to escape the Financial Action Task Force blacklist grey list, an independent audit of the Banque du Liban and commercial banks for transparency, and a clear framework for distributing financial losses. 

He further added that the country needs a sustainable economic growth strategy focused on key sectors like technology, services, and exports.

One early positive sign came when Salam vowed to end sectarian quotas in financial appointments, a longstanding governance issue.

The financial burden on depositors

Lebanese banks had placed the majority of their funds with the central bank, whose financial engineering schemes propped up government spending and an unsustainable currency peg. Disagreements over how to distribute financial losses have fueled political deadlock.

Ajaka suggested deep restructuring of the banking sector, including mergers based on economic benefits and asset sales where necessary. “This restructuring should prioritize both depositors’ interests and the Lebanese economy. However, we must first determine the financial status of each bank before deciding the best course of action,” he said.

Depositors continue to bear losses while those responsible remain unpunished, Farida said. In 2023, the adviser proposed an alternative recovery roadmap outlining a phased approach to restoring depositors’ savings while holding financial elites accountable for the economic collapse. 

The plan prioritizes an immediate payout to small depositors, funded by a comprehensive audit of bank reserves and the recovery of excessive interest payments and illicitly transferred funds. Larger deposits would be gradually restored through a combination of bank bail-ins and legal actions against those responsible for mismanaging Lebanon’s banking sector. 

Lebanon’s ability to secure economic aid and investments is deeply tied to the shifting geopolitical landscape.

Ralph Baydoun, founder and director of InflueAnswers

Commenting on the reduction in the potential payouts for depositors, Farida said: “The more time we wait, the less this number is. I expect this number to be going down with time. Unless there is a complete audit, we can’t really tell the exact number.”

Unlike past government proposals, Farida’s plan rejects the use of public assets to cover banking losses, aiming instead to shield state resources from further depletion. However, with deposit values eroding daily, he warns that delays in implementation will make full recovery increasingly difficult.

The Depositors’ Union welcomed reform pledges but stressed accountability, rejecting any plan shifting banking losses to public assets. It called for fair restructuring that prioritizes depositors’ rights and holds banks accountable.

“Accountability is the key for any reform plan. There cannot be a regain of the trust in the system, in the public sector or in banking sector, if the ones who were responsible for this crisis were not held accountable,” Mohammad Farida, the economic adviser to the Depositors’ Union in Lebanon, told Arab News.

One of the greatest obstacles to reform was Hezbollah’s influence over the state. The group’s political and military entrenchment continued for years to deter international investment and prevented Lebanon from fully reintegrating into the regional economy. 

The damage cannot be undone by words alone. Only material deliverables can restore trust — locally, regionally, and globally.

Fadi Nicholas Nassar, senior fellow at the Middle East Institute

For Lebanon to emerge from its crisis, Nassar argued, major structural changes are needed. “Restoring full sovereignty means dismantling Hezbollah, not just managing around it. Governance must shift from patronage to competence, with ministries staffed by professionals, not cronies. Basic services like electricity cannot remain luxuries,” he said.

Baydoun argued that Hezbollah is now in a more precarious position than in previous years due to financial strains from war and a decline in Iranian support. 

He explained to Arab News that Lebanon’s ties with Iran and Hezbollah have long restricted Western and Gulf financial support. 

Baydoun highlighted that the diminishing influence of Iran’s regional network and the weakening of the Assad regime in Syria have created an opportunity for Lebanon to move closer to Western spheres of influence and regain donor confidence.

The economic crisis deepened as the humanitarian situation worsened. The World Bank estimated Hezbollah-Israel war damages at $8.5 billion, with the economy shrinking 10 percent in 2024 — its fifth year of contraction, totaling over 34 percent of the gross domestic product. Over 875,000 were displaced, and key sectors faced billions in losses.

“The estimated $10 billion required for reconstruction in Lebanon will likely come from international donors, primarily the GCC (Gulf Cooperation Council), rather than from Iran,” Baydoun added.

On Jan. 29, President Aoun reaffirmed Lebanon’s commitment to reforms, stating that the new government’s priority is drafting necessary legislation. In a meeting with World Bank official Osman Dion, Aoun said: “The first task of the new government is to immediately begin drafting the necessary legislation for this purpose.” 

Accountability is the key for any reform plan. There cannot be a regain of the trust in the system, in the public sector or in banking sector, if the ones who were responsible for this crisis were not held accountable.

Mohammad Farida, economic adviser to the Depositors’ Union in Lebanon

Nassar said that Lebanon’s new government has only one way to prove its legitimacy – by delivering results. 

“The damage cannot be undone by words alone. Only material deliverables can restore trust — locally, regionally, and globally,” he said.

Moody’s has projected that economic activity could begin to recover later this year, contingent on political stability and the implementation of reforms. Yet, Lebanon’s road to recovery is far from guaranteed. International donors — including the Gulf ones — remain skeptical, demanding real action rather than political rhetoric.

“Attracting foreign direct investments requires two key conditions: Lebanon must implement ceasefire agreements with Israel and establish an independent judiciary to combat corruption,” Ajaka stated. He added that Lebanon’s high return on investment potential could make it a key regional player if these conditions are met.

Saudi Arabia’s Foreign Minister Faisal bin Farhan underscored this sentiment during a visit to the country on Jan. 23, saying: “We will need to see real action, real reform, and a commitment to a Lebanon that is looking to the future, not to the past.”

Baydoun explained that Lebanon’s exclusion from key regional trade routes, including China’s Belt and Road Initiative and the Iraq-Syria-Turkiye-Europe corridor, stems from both political instability and shifting regional alliances. 

To avoid further marginalization, he noted, Lebanon must actively lobby for integration and position itself as a strategic trade hub. The Beirut Port explosion accelerated its economic sidelining, making its reconstruction — aligned with regional trade networks— a priority. “If Lebanon does not proactively position itself as an indispensable part of one of these networks, it risks permanent exclusion from the evolving global supply chain,” Baydoun added.

The energy sector and economic recovery

Addressing the financial crisis, energy policy expert and Middle East and North Africa director of the Natural Resource Governance Institute, Laury Haytayan, said: “There is a need to encourage the private sector to invest in the renewable energy sector to go beyond the individual initiatives.”

Lebanon’s offshore gas has often been seen as an economic game-changer, but Haytayan warned against unrealistic expectations, saying that the nation lacks active hydrocarbon discoveries, making energy wealth an unreliable recovery catalyst.

The energy expert dismissed the notion of using the country’s underdeveloped oil and gas sector as a bargaining chip in negotiations with international stakeholders, while stressing the need to restructure Lebanon’s electricity sector rather than relying on oil and gas for short-term recovery. 

Haytayan urged regulatory reforms, including appointing the long-awaited electricity regulator and enforcing the 23-year-old electricity law mandating Electricite Du Liban’s unbundling and private sector involvement. She questioned whether the new minister would push for privatization, a move which Ajaka argued is crucial for state-owned enterprises, particularly in the electricity sector. 

“Lebanon has spent over $50 billion on electricity with no results. Justice must investigate these expenditures,” he said, citing the UK’s deregulation success as a potential model for Lebanon.

Looking at regional energy developments, Haytayan was clear that Lebanon cannot be measured against leading Gulf states, saying: “There is no country in the Middle East and North Africa that could be compared to Saudi Arabia and the UAE when it comes to technical and financial capacities.”

Baydoun argued that the Gulf’s dominance in energy does not hinder Lebanon’s potential but rather offers a strategic advantage. While the GCC exports to Asia, Lebanon — if it begins oil and gas production — could target European markets, avoiding direct competition. He added that Lebanon should leverage the GCC for technical expertise and investment.

The economic adviser to the Depositors’ Union adviser Farida said the primary challenge in implementing reforms and resolving Lebanon’s economic crisis lies in the need for legislative updates, including new laws requiring parliamentary approval, stressing that any plan must first gain parliamentary backing to have a real chance of success.

He said: “It’s still premature to judge whether this administration will be able to actually produce a new comprehensive plan for the financial gap in the banking sector and the overall crisis in the public sector and the administration.”


Closing Bell: Saudi main index closes in green at 10,922

Closing Bell: Saudi main index closes in green at 10,922
Updated 05 August 2025
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Closing Bell: Saudi main index closes in green at 10,922

Closing Bell: Saudi main index closes in green at 10,922

RIYADH: Saudi Arabia’s Tadawul All Share Index edged up on Tuesday, as it gained 82.40 points, or 0.76 percent, to close at 10,921.85. 

The total trading turnover of the benchmark index was SR5.49 billion ($1.46 billion), with 164 of the listed stocks advancing and 83 declining. 

The Kingdom’s parallel market Nomu, however, shed 38.57 points to close at 26,852.82. 

The MSCI Tadawul Index advanced by 0.8 percent to 1,408.36. 

The best-performing stock on the main market was Saudi Printing and Packaging Co. The firm’s share price increased by 9.98 percent to SR12.12. 

The share price of Ades Holding Co. rose by 9.97 percent to SR14.45. 

Saudi Industrial Investment Group also saw its stock price climb by 8.3 percent to SR19.45. 

Conversely, the share price of United Cooperative Assurance Co. dropped by 7.91 percent to SR5.94. 

On the announcements front, Ades Holding Co. announced that its subsidiary ADES International Holding Ltd. signed an agreement to acquire all issued and outstanding shares of Shelf Drilling Ltd. 

In a Tadawul statement, Ades Holding revealed that the deal, valued at SR1.42 billion, will be funded through the company’s existing credit facilities.

The company added that this latest development could help the firm position itself as a global leader in the shallow-water drilling segment, with the combined entity operating a fleet of 83 offshore jack-up rigs, including 46 premium units, following the addition of 33 jack-ups through this new transaction. 

Founded in 2012, Shelf Drilling is an international shallow water offshore drilling contractor with rig operations across the Middle East, Southeast Asia, and India, as well as West Africa, the Mediterranean, and the North Sea. 

Saudi Cement Co. announced that its net profit for the first half of this year stood at SR204 million, representing a 1.44 percent increase compared to the same period in 2024. 

In the Tadawul statement, the cement manufacturer attributed the rise in net profit to an increase in sales revenue, a decrease in selling and distribution expenses, and a drop in finance charges.

The share price of Saudi Cement Co. edged up by 0.57 percent to SR38.72. 

Bupa Arabia for Cooperative Insurance Co. reported a net profit of SR666.48 million in the first six months of this year, marking a decline of 12.76 percent compared to the same period in 2024. 

The stock price of the insurance firm declined by 3.91 percent to SR154.80. 

Taiba Investments Co. said that its net profit for the first half stood at SR238.4 million, marking a year-on-year rise of 29.84 percent. 

In a Tadawul statement, the company said that the rise in net profit was driven by higher operating revenues across the firm’s various segments. 

Taiba Investment Co.’s share price edged down by 1.56 percent to SR39.10. 

Arabian Mills for Food Products Co. reported that it recorded a net profit of SR117.55 million in the first half of this year, representing an increase of 15.81 percent compared to the same period in 2024. 

According to a statement, this rise in profit was driven by higher revenues from the flour segment, along with improved management of administrative fees, as well as operating expenses, and lower finance costs. 

The share price of Arabian Mills for Food Products Co. rose by 0.59 percent to SR44.16. 

Fawaz Abdulaziz Alhokair Co., also known as Cenomi Retail, widened its net loss to SR83 million in the first six months of this year, compared to an SR68 million loss it incurred in the same period in 2024. 

The share price of Cenomi Retail dropped by 3.83 percent to SR27.12.


Kuwait, Qatar, UAE maintain non-oil growth momentum; Egypt shows recovery signs while Lebanon struggles

Kuwait, Qatar, UAE maintain non-oil growth momentum; Egypt shows recovery signs while Lebanon struggles
Updated 05 August 2025
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Kuwait, Qatar, UAE maintain non-oil growth momentum; Egypt shows recovery signs while Lebanon struggles

Kuwait, Qatar, UAE maintain non-oil growth momentum; Egypt shows recovery signs while Lebanon struggles

RIYADH: Non-oil business activity in the Middle East showed mixed trends in July, with Kuwait, the UAE, and Qatar maintaining growth, while Egypt demonstrated signs of recovery and Lebanon remained under pressure.

According to the latest Purchasing Managers’ Index report released by S&P Global, Kuwait’s PMI ticked up to 53.5 in July from 53.1 in June, signalling a solid monthly improvement in the health of the non-oil private sector. 

This robust performance of non-energy business conditions in Kuwait aligns with the wider trend observed in the Gulf Cooperation Council region, where countries are pursuing economic diversification efforts to reduce dependence on crude revenues. 

“Kuwait’s non-oil private sector began the second half of 2025 in much the same way as it ended the first, with output and new orders up markedly again in July,” said Andrew Harker, economics director at S&P Global Market Intelligence. 

Survey panelists linked higher new orders in July to advertising efforts and price discounting, which helped to further raise the output. 

According to the report, employment levels in Kuwait’s non-oil sector remained broadly unchanged in July, following a record increase in June. 

S&P Global added that inflationary pressures softened in the seventh month of the year, with purchase prices and staff costs increasing at the slowest rates in six and four months, respectively.

“Firms will have been cheered by a softening of inflationary pressures during the month, but the reluctance to hire extra staff did mean that backlogs of work accumulated again,” said Harker. 

The survey data also revealed that Kuwaiti companies remained strongly optimistic about future growth, on the hopes that output will rise further in the remaining months of the year. 

“The prospects for further expansions in new business in the months ahead appear bright, and we’ll hopefully see this reflected in renewed hiring activity soon,” added Harker. 

UAE’s PMI declines amid geopolitical tensions

UAE’s PMI slipped to 52.9 in July from 53.5 in June but remained well above the 50 mark that signals expansion of the non-energy business conditions. 

S&P Global attributed this decline to a slowdown in new business growth across the non-oil economy, as ongoing regional tensions made some clients hesitant to commit to new spending.

Panelists who took part in the survey also pointed to weaker tourism activity and headwinds from global trade disruptions to lower activities in July. 

Despite this decline, output expanded sharply in June, as non-oil firms in the Emirates sought to prevent further increases in backlogs of work.

“Business conditions improved in July, but the rate of growth was the weakest since the middle of 2021. As has been the case recently, output was supported by positive demand trends,” said David Owen, senior economist at S&P Global Market Intelligence. 

He added: “New order volumes helped firms to expand, but this trend is declining, with the latest data indicating the softest rise in incoming new work in almost four years.” 

The softer increase in new orders contributed to a slight easing in the rate of activity expansion in July, which was further dampened by intensified competitive pressures

The report also revealed that some firms reported that output increased in response to new sales opportunities, rising client incomes, advancements in technological investment, and the clearance of pending work.

The July survey data indicated that job growth softened in over the month, marking the weakest uplift in four months. 

“Should regional tensions ease, we may see a recovery in sales growth in the coming months. This would also be supported by the subdued price environment, with input costs rising only modestly despite the pace of increase reaching a three-month high,” said Owen. 

He added: “Nevertheless, the ongoing trends of rising competition, limited inventory, constrained hiring growth and relatively low confidence among surveyed firms suggest that downside risks remain elevated.” 

In the same report, S&P Global revealed that Dubai’s PMI rose to 53.5, up from a 45-month low of 51.8 in June, signalling a solid upturn in operating conditions across the Emirate’s non-oil private sector economy.

Dubai non-oil firms also expanded their output at the sharpest rate in five months in July, while continuing efforts to increase employment and inventories.

Non-energy business conditions improve in Qatar

In a separate report, S&P Global revealed that business conditions in Qatar’s non-energy sector continued to improve in July, with the country’s PMI remaining above the 50-expansion zone for the 19th consecutive month. 

The country’s PMI fell to 51.4 in July from 52 in June.

The report revealed that non-energy private sector employment in Qatar increased at the second-strongest rate in the eight-year survey history, driving a further sharp increase in wages.

“The PMI remained above the neutral threshold at 51.4 in July, signalling sustained overall growth in the non-energy private sector. But the headline figure continues to mask underlying weakness in demand and output, being heavily supported by another round of strong employment growth,” said Trevor Balchin, economics director at S&P Global Market Intelligence. 

Companies in the non-energy private sector remained optimistic regarding the 12-month outlook for activity in July, due to expected growth in investment, tourism, and industrial development, as well as a recovery in construction, population expansion, and government initiatives. 

Egypt’s PMI nearing growth trajectory 

In another report, S&P Global revealed that Egypt’s PMI increased to 49.5 in July, up from 48.8 in June, but still remaining below the 50 no-change threshold for the fifth consecutive month. 

According to S&P Global, Egyptian non-oil business conditions deteriorated for the fifth consecutive month in July, although the decline was less severe than in June, with firms reporting softer contractions in both activity and new orders.

The report added that businesses increased headcounts for the first time since last October, while cuts in purchases softened. 

“Although the Egypt PMI stayed below 50 in July, indicating a worsening of non-oil business conditions, the latest survey data provided some cause for optimism. Several firms reported the securing of new work, which helped to soften the rate of decline in sales,” said Owen. 

He added: “Businesses also had the confidence to hire new staff, leading to an increase in employment for the first time in nine months, if only a fractional one.”

Input prices also rose at a slightly quicker pace in July, with survey panelists attributing this trend to higher costs for items such as cement, fuel and packaging. Increased staff wages also contributed to cost pressures, although the rate of growth was mild. 

Regarding future activity, companies in Egypt continued to express concerns about demand strength and broader economic uncertainty, with optimism improving slightly from June’s record low. 

Lebanon’s PMI drops 

According to the latest report, Lebanon’s private sector economy remained under pressure at the start of the second half of the year, with the PMI in July dropping to 48.9 from 49.2 in June. 

The report revealed that business activity volumes across Lebanon’s private sector fell further in July, extending the current sequence of contraction to five months, driven by subdued demand conditions, particularly from abroad.

“The July 2025 BLOM Lebanon PMI dropped to 48.9. This result was not unexpected as the economy lacked any meaningful demand stimulus: the government does not have any money to spend and the private sector is not able and willing to spend,” said Ali Bolbol, chief economist and head of research at BLOMInvest BANK. 

Private sector companies in Lebanon lowered their purchasing volumes as a part of their efforts to reduce costs. 

Looking ahead, surveyed companies remained pessimistic toward the year-ahead outlook for business activity, with these firms expressing negative consequences of a potential escalation of conflict and tensions across the Middle East region. 


Saudi Arabia’s non-oil growth stays strong despite softer July PMI

Saudi Arabia’s non-oil growth stays strong despite softer July PMI
Updated 05 August 2025
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Saudi Arabia’s non-oil growth stays strong despite softer July PMI

Saudi Arabia’s non-oil growth stays strong despite softer July PMI

RIYADH: Saudi Arabia’s non-oil business activity continued to expand in July, even as growth momentum softened, with the Purchasing Managers’ Index easing to 56.3, down from 57.2 in June, a market tracker showed. 

Compiled by S&P Global for Riyad Bank, the PMI remained well above the neutral 50-point threshold, signaling ongoing improvement in private sector operating conditions. 

The robust growth in Saudi Arabia’s non-oil business activity aligns with the broader goals of Vision 2030, which aims to diversify the Kingdom’s economy and reduce its reliance on oil revenues. 

This comes as Saudi Arabia’s economy grew by 3.9 percent year on year in the second quarter of 2025, driven by strong non-oil sector performance, according to flash estimates released last month by the General Authority for Statistics. 

Naif Al-Ghaith, chief economist at Riyad Bank, said: “Saudi Arabia’s non-oil economy remained on a solid growth track in July, supported by higher output, new business, and continued job creation. Although the headline PMI edged down to 56.3 from 57.2 in June, the reading still pointed to a healthy level of activity across the private sector.” 

He added: “Firms continued to benefit from ongoing project work, resilient domestic demand, and focused marketing efforts, even as some indicators showed signs of cooling compared to earlier in the year.” 

Al-Ghaith noted that the slight dip in the headline index was primarily due to a moderation in new order growth. He said businesses were still experiencing improved demand, though “competitive pressures and more cautious client spending weighed on the pace of expansion.” 

He also pointed out that external demand was softer and that purchasing activity had increased at a slower pace. 

On the employment front, Al-Ghaith said firms continued to expand their workforce to support rising activity, with “July marking another solid month of hiring as companies worked to keep operations running smoothly.” 

He further noted that firms expect growth to continue over the coming year, underpinned by steady demand, strong pipelines, and Vision 2030-linked investments. 

Employment is expected to remain supportive, although rising input costs and wages led to price hikes — especially in services, construction, and manufacturing. 

The PMI report also showed that non-oil private sector output grew strongly in July, driven by ongoing projects and new orders. However, the pace of expansion was the slowest in three and a half years. 

Order books continued to develop, buoyed by solid domestic demand and active sales efforts. However, growth was partially offset by intensifying competition, lower footfall, and the first drop in export orders in nine months, as firms faced challenges in attracting new foreign clients. 

In response to rising activity and backlogs, firms recorded another sharp increase in hiring, following June’s 14-year employment peak. The uptick was attributed to capacity constraints and growing workloads. 

Inventory levels rose significantly in July, particularly among manufacturers and wholesale and retail firms, even as new input purchases slowed. Delivery times improved but at a slower rate, in part due to customs delays. 

Input prices in the Kingdom’s non-oil sector increased strongly during the month — albeit at a slightly slower pace than in the second quarter — driven by steep salary hikes to retain staff. This contributed to a rise in selling prices for the second straight month. 


MENA IT spending to reach $169bn in 2026 

MENA IT spending to reach $169bn in 2026 
Updated 05 August 2025
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MENA IT spending to reach $169bn in 2026 

MENA IT spending to reach $169bn in 2026 

RIYADH: Information technology spending in the Middle East and North Africa region is forecast to reach $169 billion in 2026, marking an 8.9 percent increase from 2025, according to the latest projections from Gartner.

The surge is driven by accelerated adoption of artificial intelligence, intelligent automation, and AI-optimized infrastructure upgrades, as organizations across the region prioritize digital transformation amid global economic and geopolitical uncertainties. 

Gartner’s forecast is already taking shape in Saudi Arabia, where AI adoption is surging, as seen with the launch of Humain, a state-backed AI company unveiled in May by the Public Investment Fund.

Positioned at the forefront of the Kingdom’s ambition to become a global AI hub, Humain focuses on deploying advanced AI infrastructure, developing Arabic multimodal large language models, and forging strategic partnerships with global technology leaders such as Nvidia, AMD, and Amazon Web Services. 

“The MENA region is rapidly emerging as a global tech powerhouse, with the Gulf Cooperation Council leveraging its stability, infrastructure and forward-looking policies to attract global partners and build digital skills that empower innovation and support resilient AI-driven economies,” said Mim Burt, practice vice president at Gartner. 

“Even amid global economic and geopolitical uncertainty, chief information officers in MENA are making strategic investments in AI, intelligent automation and multi-cloud strategies, while strengthening cyber defenses and advancing talent upskilling,” Burt added. 

Data center systems will remain the highest-growth segment in 2026, with spending projected to increase by 37.3 percent to $13 billion. 

However, Gartner noted that the pace will moderate compared to 2025’s 69.3 percent growth, as the market transitions from rapid buildouts to more incremental and sustained investments. 

“Data center system spending is expected to accelerate as MENA CIOs and technology leaders invest in AI-enabled software and AI-optimized infrastructure,” said Eyad Tachwali, vice president, advisory at Gartner. 

“This surge is largely fueled by pent-up demand for generative AI and advanced machine learning, which depend on robust computing power for large-scale data processing,” Tachwali added. 

“Most of this demand is being driven by governments, hyperscalers, technology providers and organizations focused on developing and deploying AI models, rather than traditional enterprises or consumers,” he noted. 

Software spending is also expected to see significant growth, rising 13.9 percent to $20.4 billion in 2026, as organizations across MENA integrate GenAI capabilities into their operations. 

Gartner projects that by 2028, 75 percent of global software spending will be directed toward solutions embedded with GenAI functionality. 

“CIOs will increasingly be offered embedded GenAI capabilities in enterprise applications, productivity and developer tools, more advanced large language models as well as AI-optimized servers to support AI-as-a-service,” said Burt. “Providers are also exploring new pricing models across software and hardware to drive revenue.” 

IT services spending in the region is projected to grow 8.3 percent in 2026, reflecting the shifting priorities as AI becomes a central component of enterprise strategies. 

“With the rapid acceleration of AI infrastructure and adoption in MENA, CIOs must move beyond GenAI as a productivity tool and embed it into the heart of their business strategy,” said Tachwali. 

“The real competitive edge will come from building strong data foundations, composable technology platforms and cultivating AI-fluent talent — core enablers for unlocking differentiated value from AI,” he added. 

Initiatives in this field across the region include those contained in Saudi Arabia’s broader Vision 2030 strategy, under which the Saudi Data and AI Authority is spearheading nationwide efforts to embed AI across economic sectors and elevate the country’s competitiveness. 

Similarly, the UAE continues to reinforce its leadership in the sector with its UAE AI Strategy 2031, which aims to position the nation among the top AI-driven economies worldwide. 

The UAE’s partnership with OpenAI under the Stargate UAE initiative will establish a 5-gigawatt AI campus in Abu Dhabi, providing nationwide ChatGPT access and positioning the country as a regional AI hub with global-scale compute infrastructure. 


Global M&A hits $2.6tn peak year-to-date, boosted by AI and quest for growth

Global M&A hits $2.6tn peak year-to-date, boosted by AI and quest for growth
Updated 05 August 2025
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Global M&A hits $2.6tn peak year-to-date, boosted by AI and quest for growth

Global M&A hits $2.6tn peak year-to-date, boosted by AI and quest for growth
  • M&A value up 28 percent from last year, driven by US megadeals
  • AI and regulatory changes boost corporate growth motivations
  • Private equity re-enters market, fueling deal activity

LONDON: Global dealmaking has reached $2.6 trillion, the highest for the first seven months of the year since the 2021 pandemic-era peak, as a quest for growth in corporate boardrooms and the impact of a surge in AI activity has overcome the uncertainty caused by US tariffs.

The number of transactions to August 1 is 16 percent lower than the same time last year, but their value is 28 percent higher, according to Dealogic data, boosted by US megadeals valued at more than $10 billion.

They include Union Pacific Corp’s proposed $85 billion acquisition of small rival Norfolk Southern and OpenAI’s $40 billion funding round led by Softbank Group.

The upsurge will be a relief to bankers who began the year with expectations the administration of US President Donald Trump would lead to a wave of consolidation.

Instead, his trade tariffs and geopolitical uncertainty made companies pause until renewed confidence in corporate boardrooms and the US administration’s anti-trust agenda changed the mood.

“What you’re seeing in terms of deal rationale for transactions right now is that it’s heavily growth-motivated, and it’s increasing,” Andre Veissid, EY Global Financial Services Strategy and Transactions Leader, told Reuters.

“Whether it’s artificial intelligence, the change in the regulatory environment, we see our clients not wanting to be left behind in that race and that’s driving activity.”

Compared with August 2021, when investors, rebounding from pandemic lockdowns drove the value of deals to $3.57 trillion, this year’s tally is nearly a $1 trillion, or 27 percent, lower.

Still deal-makers at JP Morgan Chase have said there is more to come, with companies pursuing bigger deals in the second half of the year as executives adapt to volatility.

“People have got used to the prevailing uncertainty, or maybe the unpredictability post-US election is just more predictable now,” Simon Nicholls, co-head of Slaughter and May Corporate and M&A group, said.

Nigel Wellings, partner at Clifford Chance said the market was moving beyond tariffs. “Boardrooms are seeing the M&A opportunity of a more stable economic environment and positive regulatory signals. But it is not a frothy market.”

From health to tech

While the healthcare sector drove M&A in the years after the pandemic, the computer and electronics industry has produced more takeover bids in the US and the UK in the last two years, according to Dealogic.

Artificial intelligence is expected to drive more dealmaking. M&A activity has increased around data center usage, such as Samsung’s $1.7 billion acquisition of Germany’s FlaktGroup, a data center cooling specialist.

Palo Alto Networks $25 billion deal for Israeli cybersecurity peer CyberArk was the largest deal in Europe, Middle East and Africa so far this year as rising AI-driven threats push companies to adopt stronger defenses.

Private equity, which had been sitting on the sidelines, has once again been active, with Sycamore Partners’ $10 billion deal to take private Walgreens Boots Alliance and rivalling 4.8 billion pound offers from KKR and Advent for UK scientific instrument maker Spectris.

The US was the biggest market for M&A, accounting for more than half of the global activity. Asia Pacific’s dealmaking doubled over the same year to date period last year, outpacing the EMEA region.