Middle East economic powers gamble on new realities, from oil demand to Egypt’s future

February 2024 Al-Monitor Trend Report 

2,430 words

A historic deal has Egypt’s battered economy nearing a potential turning point. On Feb. 23, Cairo unveiled a $35 billion investment from the UAE centered on developing a prime slice of the Mediterranean coastline. Touted as Egypt’s largest ever deal, the investment changes the outlook for a government grappling with a crippling financial crisis.

The move should help pave way for a new deal with the International Monetary Fund (IMF), with these Emirati inflows key to providing Cairo with a buffer to navigate another devaluation of the pound at a moment when Houthi attacks on Red Sea shipping are sapping badly needed Suez Canal revenues, exacerbating Egypt’s foreign currency shortages. 

In announcing the deal, the UAE touted potential to support Egypt’s economic growth and development, while projecting that the mega-project could attract investments surpassing $150 billion. Left unmentioned was how Egypt’s teetering economic health could impact the broader Middle East as the Gaza war continues threatening regional stability.

Notably, the UAE’s big bet on Egypt emerged two days after Emirati defense conglomerate EDGE and Italian shipbuilder Fincantieri created an Abu Dhabi-based joint venture to manufacture naval vessels, creating an enterprise with a commercial pipeline valued at about $32 billion. The move fits into a broader pattern in the Gulf, where governments are pouring money into new strategic industries amid ambitious economic diversification drives. Those plans hinge in part on restoring regional calm shattered by the Israel-Hamas war. Key to that will be stabilizing vulnerable economies.