Thursday, 5 January 2023

A message from Mashreq

Outlook for 2023

Message by Amr El Bahey — CEO of Mashreq Egypt

Global economic activity may face some headwinds next year as central banks around the world continue to tighten monetary policy in response to higher inflation. However, banks can chart their own path and stay ahead of the curve by creating new sources of value in the areas of financial technology, sustainable and green financing, digital transformation, and workforce optimization. Another important factor that could expedite economic recovery will be China’s ability to bounce back from the supply chain and covid-19 related disruptions. A rapid economic recovery in China could have a positive impact on global economies.

Closer to home, in the Middle East and North Africa (MENA), the macro-outlook is warmer. The World Bank’s latest MENA Economic Update estimates that the region’s economies will grow by 5.5% in 2022 — the fastest rate since 2016. It is worth noting, however, that the economic recovery may be uneven in MENA as regional averages mask broad differences between countries. As 2023 unfolds, MENA oil producers may continue to benefit from elevated energy prices, along with higher vaccination rates for covid-19. 


Following the success of Expo 2020 Dubai, the UAE will once more dominate the world’s attention as it hosts COP28. The event will provide the country with an opportunity to frame itself as an innovator and leader in energy transition and position itself as a pro-investment destination to global investors. 

The country has made significant efforts to promote sustainability in recent years. As part of the UAE Energy Strategy, it has set a target of generating 50% of its electricity from clean energy sources by 2050. To achieve this goal, it has invested more than USD 40 bn in domestic renewable energy projects with a focus on solar power.

Overall, the UAE’s commitment to clean energy is an important part of its efforts to reduce its carbon footprint and combat climate change and drive the country’s long term economic ambitions. Complementing this strategy, we expect other key pillars of the economy such as tourism, healthcare, transport, and financial services to shield against any potential negative impact of high inflation and rising interest rates.

In 2022, we saw the country launch its USD 27 bn National Tourism Strategy 2031, which sets out plans to welcome 40 mn hotel guests per year by 2031. The nation’s transport sector also received a significant boost in 2022 after the announcement of new infrastructure plans in Plan Abu Dhabi 2030, in addition to plans for high-speed rail and metro extensions in Dubai. 

Some projections expect the UAE non-oil economy to significantly outperform the country’s total GDP growth, which is expected to fall slightly to 2.7% in 2023. This bodes well for the advancement of the nation’s long-term economic diversification strategy. 


Recognizing the interconnectedness of MENA economies and the important role Egypt plays in regional growth, GCC partners have pledged USD 22 bn of development finance to the nation. By mid-December 2022, the GCC countries disbursed more than USD 11 bn of this amount through a series of investments and partnerships in Egypt, with the remainder expected to follow as foreign direct investment (FDI) in due course. 

Egypt’s government has implemented several economic reform measures, including devaluing the currency and implementing a value-added tax (VAT), in an effort to strengthen the country’s fiscal position and encourage economic growth. The country continues to move through a period of fiscal policy and regulatory change that is advancing economic opportunity and financial inclusion, creating new prospects for the financial sector. 

Hosting the world’s largest climate gathering highlighted Egypt’s commitment to fighting climate change and created new prospects for green development in the country. Egypt offers ample opportunities for investment. Its robust energy sector is a key driver of economic growth, with the country’s abundant oil and natural gas reserves providing a major source of revenue. Meanwhile, the renewable energy equipment market is worth several USD bns. Egypt’s Integrated Sustainable Energy Strategy aims to increase the share of energy generated from renewables to 42% by 2035. 

A prime example of an ambitious project in this space is one of the largest wind farms in the world with a capacity of 10 GW, set to be developed in partnership with Masdar, the UAE’s flagship renewable energy company. A memorandum of understanding (MoU) for the joint venture was signed at COP27 that took place in Sharm El Sheikh in November 2022. 


While the global economy may need to navigate through unchartered territory during 2023, we remain optimistic on the outlook for the GCC region with the World Bank forecasting regional economic growth at around 7% — the strongest growth rate for more than a decade. This is due in part to a combination of stable governance, national transformation strategies, and strong oil revenue, which will enable GCC countries to run sizable fiscal surpluses. It will lead to further investments in high growth sectors of the economy thus further diversifying local economies. Additionally, the emergence of a rapidly maturing energy transition industry is creating multiplier effects and value chain opportunities across the broader economy and the banking sector. 


The UAE’s hosting of COP28 in 2023 dovetails with the significance of the energy transformation for our region as an economic imperative. COP28 is particularly important for the collective fight against climate change, as it will provide a platform to present the results of the first global stocktake of the Paris Agreement. The event will present the UAE with a unique leadership opportunity to highlight the region’s clean energy credentials, promote sustainable finance, and drive the climate agenda. 

Across our region, sustainable finance is a fast-growing sector for the banking industry, and one that will play an increasing role in delivering environmental, social, and governance (ESG) impact in 2023 and beyond. Our focus at Mashreq will be to significantly increase the volume of sustainable finance we facilitate, which is targeted to reach USD 30 bn by 2030. We anticipate robust demand for sustainable finance as our clients implement their transition strategies, and we are ready to facilitate and advise over the coming year.


The multiplier effects of ESG investing and sustainable finance may also provide avenues for investment and growth for other industries in 2023, including finance, infrastructure, manufacturing, real estate, e-commerce and consultancy services. Indeed, within the context of slow growth that has come upon the rest of the world, the GCC offers investors opportunities for long-term returns that may not be available elsewhere. This has been further elevated by the deployment of new visa and residency schemes in several GCC nations that now make it even easier to do business here. 

Technology first

Looking to the banking sector, there will be continued progress towards greater personalization through the application of data and analytics, shaping the transformation of banking as a service (BaaS). Mashreq is proud to have led the ecosystem through the launch of the region’s first application programming interface (API) developer portal in 2021 and will work hard to leverage its digital strengths to forge its growing role at the heart of the BaaS revolution. 

The change in how banks operate will, of course, continue at pace in 2023. For many, it will take on an existential dynamic because the traditional banking model is no longer relevant. All banks must emerge as technology companies first and as providers of financial services second. As 2023 unfolds, we anticipate that a growing number of banks will move through periods of profound structural change. Agility through in-house innovation and partnerships across the fintech ecosystem are the keys to banking growth. 

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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