How diversification in the Middle East is powering growth

When top economists were recently asked to weigh in on the trajectory of the global economy, they painted an unsettling picture. Disruption and uncertainty have taken a toll, according to responses gathered for the World Economic Forum’s latest “Chief Economists’ Outlook.”

Yet, one region stood apart: the Middle East and North Africa (MENA). Thirty-seven percent of the chief economists surveyed for the September edition expect strong or very strong growth for the region in the year ahead, up sharply from 22% in May. Chief economists were not as optimistic about any other region.

The next-highest percentage expecting strong or very strong regional growth was 31% for South Asia. For some prominent regions in the West, optimism about growth was negligible or non-existent.

That divergence reflects that MENA’s economic moment is being powered less by global economic cycles or the region’s access to natural resources but by something more fundamental: a forward-looking strategy by regional governments, especially those in the Gulf, for deliberate diversification and far-reaching investment into innovation, inclusion, sustainability and resilience – the fundamental pillars of long-term, higher-quality economic growth.

Oil production, of course, remains an important pillar and, while plans are underway to boost oil production, the region has also been ramping up its renewable energy resources at striking speed.

Solar photovoltaic capacity in MENA is expected to increase tenfold by 2035, as the share of renewables in its overall electricity generation reaches 25%. Meanwhile, its nuclear capacity is projected to triple.

As part of its Vision 2030 transformation plan, Saudi Arabia recently committed to investing about $8 billion in new domestic solar and wind plants with a collective capacity of 15,000 megawatts (a single megawatt solar array running for an hour is sufficient to power an electric car from Riyadh to Oslo).

Another element of Vision 2030 is a proactive artificial intelligence (AI) strategy, with Saudi Arabia investing heavily in the necessary data centres, infrastructure and startups. The United Arab Emirates (UAE) has also made AI a priority.

Its “Stargate” initiative is a partnership with OpenAI that is meant to deliver a supercomputing cluster that would qualify as essential national infrastructure. OpenAI has estimated that the UAE-based project has the potential to provide enough computing capacity for the needs of half the world’s population.

These AI ambitions complement Dubai’s evolution as a global financial hub, where the overall number of companies operating in banking and capital markets increased by nearly a fifth during the first half of 2025, while those specializing in fintech and innovation jumped by 28%. Qatar, meanwhile, plans to double solar energy production by 2030, while advancing its own AI and emerging technology ecosystem.

These investments in innovation and technology are complemented by efforts to strengthen human capital and leverage the tremendous demographic potential of the region.

Saudi Arabia has recently launched sector skills councils to align education and reskilling programmes with industries’ needs, following the successful model that traditionally existed in many Northern European countries. Both Saudi Arabia and the UAE are among the countries in the world that have made the most progress to close gender gaps in the past 20 years.

For many of the Gulf countries, sustaining progress and diversifying their economies will depend on the success of these far-reaching, interdependent reforms and investments that focus on the quality as much as the quantity of economic growth.

Developing domestic innovation capacity, sharing the benefits of innovation inclusively and ensuring that sustainability and resilience underpin expansion: all these factors will be crucial to ensure that growth remains resilient amid a shifting global landscape.

However, the region remains extremely diverse. Across North Africa and the Levant, some countries continue to face conflict-related disruptions and infrastructure gaps, low investment in human capital and a lack of innovation and business dynamism. Many of these nations are taking steps to address these barriers, including with investments in both digital and physical infrastructure.

Morocco has been able to combine a skilled workforce, heavy investments in modern port and rail infrastructure and trade integration with the northern side of the Mediterranean to become a manufacturing powerhouse. Further efforts are needed to ensure progress is shared more broadly throughout the region.

The key question, then, is not whether the region can continue to grow but whether current growth can be converted into lasting prosperity throughout the region. It is a particularly useful question to ask of MENA’s economies now, given that the region still retains so much untapped growth potential.

More than half of the respondents in the latest “Chief Economists’ Outlook,” 54%, rated the region’s untapped growth potential as high or very high – far above Europe and only slightly behind Latin America.

The existing strengths and potential of MENA position the region to benefit from its demographic profile. The first half of this century is ushering a vast proportion of MENA’s relatively youthful population into what should be its most productive years. It is time to seize the moment.

Divergence was an overriding theme of the “Chief Economists’ Outlook,” between advanced and developing economies and across regions moving at different speeds. Some will struggle to adapt to a fragmenting global economy. Others will find opportunities amid change.

The Middle East appears to be among the latter. If the region can turn economic diversification into inclusive, sustainable and resilient prosperity, it will not just defy global trends – it could redefine the global playbook for sustainable growth in the 21st century.