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Home > Capital Markets Best Practice > Middle East and North Africa Region: Financial Sector and Integration

Capital Markets Best Practice

Middle East and North Africa Region: Financial Sector and Integration

by Samy Ben Naceur and Chiraz Labidi

Executive Summary

  • With a population of 345.5 million and a GDP of about $1,593 billion in 2007, the Middle East and North Africa (MENA) region has great potential, but faces major challenges.

  • By reforming their economies, most of the MENA countries have achieved macroeconomic stability, and increased their growth.

  • A more developed and well-functioning financial sector is essential to boosting sustainable economic growth in the region.

  • Given the existing complementarities between MENA countries, there are numerous possibilities for intra-regional integration. Financial integration within the region will also help deepen financial markets, and increase their efficiency.


The Middle East and North Africa region, as defined by the World Bank in the MENA 2008 Economic Developments and Prospects (EDP) report,1 comprises Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, the Palestinian Territories (West Bank and Gaza), Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates, and Yemen.

The World Bank classifies these countries within three groups: Resource-poor, labor-abundant economies (Djibouti, Egypt, Jordan, Lebanon, Morocco, Tunisia, and the West Bank and Gaza); resource-rich, labor-abundant economies (Algeria, Iran, Iraq, Syria, and Yemen); and resource-rich, labor-importing economies (Bahrain, Kuwait, Libya, Oman, Qatar, Saudi Arabia and the United Arab Emirates).

In 2007, these 19 countries and territories represented about 5% (345.5 million) of the world’s population. The region’s GDP was approximately US$1,593 billion (at current exchange rates), or about 3% of world GDP.

The Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—account for less than 11% of the population of MENA countries but for some 49% of the region’s GDP and around 80% of the area’s stock-market capitalization.2 The GCC region’s wealth is, in large part, a product of its petroleum resources.

In 2007, the MENA region experienced GDP growth of 5.7% (see Table 1), and five years of growth at a rate higher than 5%. This performance occurred in the context of a continued rise in the oil price in recent years having important spillover effects on the financial and real-estate sectors, as well as on job creation. It has also brought more interest in intraregional integration as a means of sharing prosperity within the region, and as a catalyst for global integration and competitiveness.

However, the increased interests of MENA banks and investors in the volatile equity and real-estate markets have made some economies more vulnerable to contagion effects. During 2008, the recession in developed economies, and the slowdown in emerging markets affected some MENA countries. More precisely, the region and, especially, GCC countries experienced reduced financial liquidity, and a sharp drop in shares values.

Table 1. Real GDP growth (US$ ’000s). (Source: World Bank)

2000–04 2005 2006 2007
MENA region 4.6 5.8 5.8 5.7
Resource-poor, labor-abundant* 4.2 3.7 6.3 5.4
Resource-rich, labor-abundant 5.1 6.5 5.7 5.8
Resource-rich, labor-importing 5.1 7.3 6.2 5.8

* Djibouti, Egypt, Jordan, Lebanon, Morocco, and Tunisia (West Bank and Gaza are excluded because of data limitations).

Algeria, Iran, Iraq, Syria, and Yemen.

Bahrain, Kuwait, Libya, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

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Further reading


  • Molyneux, Philip, and Iqbal Munawar. Banking and Financial Systems in the Arab World. New York: Palgrave Macmillan, 2005.
  • Noland, Marcus, and Howard Pack. The Arab Economies in a Changing World. Washington, DC: Peterson Institute for International Economics, 2007.


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