Davos 2022: High-level representation from the Middle East

This May saw the World Economic Forum 2022 in Davos take place in person for the first time since 2020 and the start of the Covid-19 pandemic. However, the annual get-together of world leaders, businesses and prominent figures was a little different this year. There appeared to be less glitz and glamour than pre-pandemic meetings, and it also seemed to garner fewer column inches in some of the mainstream press.

The more subdued tone of this year’s meeting in Davos was perhaps reflective of the serious economic and political challenges being faced. The four-day event from May 22 to May 26, focused on geopolitical challenges, in particular the ongoing Russia-Ukraine crisis and the wider economic fallout, including rising inflation and disrupted supply chains. Longer-term opportunities and challenges appeared to take a back seat this year.

Climate change remains an urgent matter and regional experts highlighted it’s severe impact during a session on transitioning to a ‘green Middle East’. While ‘green growth’ is becoming a priority, moving towards a green economy presents a greater challenge for GCC nations dependent on hydrocarbon extraction, with the importance of energy security being stressed. However, the UAE and Saudi have given impetus to investment into renewable energy production and research and development, which is expected to be a vital resource going forward.

Read: What are the biggest issues being discussed at Davos 2022?

From a regional perspective, the Middle East was well represented with the UAE, Saudi Arabia and Bahrain officials participating, as the region continues to push for greater international inclusion. The willingness to hear from these countries is indicative of the importance of oil currently, and the Saudi Arabia response to this provided interesting insight.

Prince Abdulaziz bin Salman Al Saud, Saudi Arabia’s Energy Minister, highlighted the importance of OPEC+, including Russia, in creating stability within the energy market. While he emphasised that climate change efforts should not be reversed, he made the point that current market conditions should make clear the role energy security has in supporting climate change.

Saudi Minister of Finance,  Mohammed Al-Jadaan said oil windfalls are unlikely to influence Government spending. Instead, the economic gains will be used to build up reserves, the Public Investment Fund, and the National Development Fund.

However, the finance minister did indicate VAT could be reduced back down to 5 per cent from 15 per cent, in line with the other Gulf states. Although the Saudi VAT rate is higher than its Gulf neighbours, it is not high by international standards and levying indirect taxes is a good way of diversifying government revenues, so we expect any decision to lower VAT to be carefully weighed.

UAE Government signs sustainable global strategic partnership agreement with World Economic Forum.#WamNews https://t.co/fYPreJXKzn pic.twitter.com/NSmLYo7cSt

— WAM English (@WAMNEWS_ENG) May 25, 2022

This comes at a time when the Saudi leadership is driving reforms to encourage greater investment in the region. This includes through tourism, which remains a key pillar of the nation’s diversification strategy – as Saudi rose 10 places to 33 in the World Economic Forum’s Travel and Development Index 2021, announced during the forum. This is expected to drive greater regional competition across the sector, but will ultimately create a more positive dynamic.

The UAE used Davos as an opportunity to continue to bolster agreements, including signing the Sustainable Global Partnership with the World Economic Forum, a deal which demonstrates the UAE’s intent to discuss and listen to the needs of businesses, as it aims to develop a modern and forward-thinking economy. While the deal is difficult to quantify, it gives the UAE a seat at the table and to be party to discussions on ongoing reform agendas.

Dr Thani Al Zeyoudi, UAE Minister of State for Foreign Trade, also highlighted the economic benefits since signing the Abraham Accord, as trade between UAE-Israel exceeded $2.5bn since the deal was penned and has already reached $1bn in the first quarter of 2022. While there is generally a positive outlook for the MENA region, the severity of the food security and inflation challenges will undoubtedly be of concern, as the leaders left Davos.

The writer is the ICAEW economic advisor and chief economist and MD, Oxford Economics Middle East