MENA Q1 2014 outlook

London - The MENA Outlook publication presents Arabia Monitor's insights on global markets, outlines and analyses regional future trends and defining themes, and then focuses on individual country macroeconomic views. Each publication is laid out in a concise bullet point format and features a Special Feature interview with regional leaders including central bank governors, ministers and executives.

The Q1 2014 MENA Outlook analyses Turkey's emergence over the past decade as a regional heavyweight in MENA on the political and economic fronts. We point to opportunities for scaling up exports and investments on both ends of the Turkish-Arab relationship.

Our View

2014 will be a pivotal year for the MENA region and for oil in more ways than one. Even as an interim arrangement, with a shelf life of six months, the P5+1 nuclear deal with Iran can provide relief to Iran's battered economy, and has already impacted forward contracts for oil. If Iran fulfils its commitment milestones and the world rewards it, there will be incentive to craft a larger deal. Going forward, should sanctions be incrementally lifted, investment opportunities in this diversified and under-served market of almost 80 million people will abound. The question today is whether progress on the nuclear deal could help align Iran's regional policies with those of the international community, to reduce tensions in Lebanon, Iraq and Turkey and end the war in Syria.

MENA Regional Insights

After decades of courting the EU, Turkey's foreign policy since 2002 has been reoriented towards the Middle East. A common culture and shared religion are helping Turkey to rebuild relationships that had been damaged by Ottoman colonial rule. By 2007, Turkey moved from a trade deficit to a trade surplus with MENA at USD 22B in 2012 (3% of GDP). Three main hubs emerge at the centre of the Turkish-Arab relationship: Egypt as a textile investment destination, Iraq as a large consumer market and energy source, and the GCC as capital exporters.

Today, a compelling opportunity presents itself for international brands manufacturing cars in Turkey to re-direct some of these vehicle exports to neighbouring and fast growing Arab markets. Turkey's vehicle exports to MENA only account for 7% of global Turkish vehicle exports. Although MENA's vehicle demand far outstrips Turkish production capacity, Turkey's emergence as an auto-manufacturing powerhouse has underscored its growth as a destination for MENA intermediary goods, notably aluminum and iron scraps.

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