From AI to e-commerce: These are the megatrends that will shape the future of the Middle East

If data is the oil of the 21^st century economy, then the Middle East is well-placed to thrive. The region is placing renewed importance – and significant investment – behind economic diversification strategies, with a young population tapping into the power of technology.

The move away from hydrocarbons will help the region’s economies to become more resilient in the face of climate change and a changing world.

They need to do this both for the sake of the environment and for their economic wellbeing as countries that continue to be dependent on oil and gas will fall behind as industries turn green and investors increasingly look for climate-friendly opportunities.

While the economic future of the Middle East will be affected by a multitude of factors, these five megatrends are set to play significant roles over the next decade.

Artificial intelligence (AI) is poised to become one of the most disruptive global forces of this decade, fuelled by the increasing availability and utilization of data. The Middle East region is expected to generate economic gains of up to $320 billion by 2030 through the adoption of AI.

Many Middle Eastern countries are jumping on this trend. Dubai formed a dedicated committee in July 2022 to invest in AI, the metaverse and the digital economy, and Saudi Arabia launched a National Strategy for Data and AI which includes an ambitious plan to train up to 20,000 specialists by 2030.

Bahrain is also harnessing AI to count its palm trees and to quantify agricultural production more efficiently. With these developments, AI could contribute almost $46 billion, or 8.2% of gross domestic product (GDP), to the economies of Bahrain, Kuwait, Oman and Qatar by the end of the decade.

The Middle East has one of the world’s youngest populations with children and young people accounting for around half of the population.

This represents a significant opportunity for the region to harness the energy and creativity of its young people to drive economic growth by investing in technology and education.

Bahrain, for example, has invested heavily in education and training programmes to equip young people with the skills they need not just to thrive in a knowledge-based economy, but to lead one.

Meanwhile, the education system in the United Arab Emirates (UAE) ranks among the top 20 in the world whilst Jordan, in response to the coronavirus pandemic, was able to develop comprehensive remote education platforms and repurpose the national sports TV channel to become a learning channel.

Across the Middle East, private and public sector organizations are finding innovative ways to invest in their young people and their future.

The region has a strong tradition of property investment which will be a crucial enabler of economic diversification.

Dubai and Abu Dhabi, for example, are among the most attractive property markets in the world and will experience the strongest growth of any real estate market in 2023.

Meanwhile, real estate accounts for 5% of Bahrain’s GDP and is on the rise, with all sectors of the Bahraini real estate market experiencing growth in 2022, and Saudi Arabia is making it easier to do business with its property sector by introducing an electronic platform for property registration.

Tourism will play an increasingly important role in the region’s economy as more countries seek to attract visitors from around the world.

The World Travel & Tourism Council forecasts that travel and tourism’s contribution to the Middle East’s GDP will grow at an average rate of 7.7% annually from 2022 to 2032 to be worth almost $540 billion.

The World Cup 2022 was one of the biggest sporting events ever hosted in the region – some 1.4 million people travelled to Qatar whilst 5 billion engaged with the tournament around the globe.

The Middle East is already firmly on the map as a travel destination, and many countries are working hard to establish themselves as prime tourism markets.

Saudi Arabia is already among the top 20 most visited countries in the world, largely on the back of religious tourism, and both Abu Dhabi and Dubai are fuelling strong growth in the UAE’s travel sector back to pre-pandemic levels.

Bahrain, despite being a small island, has plans to welcome 14.1 million tourists a year by 2026 and create 4,700 jobs in travel-related industries.

Similarly, Oman is investing in luxury, nature, and adventure tourism to grow the number of visitors by as much as 50% year-on-year.

The growth in digitalization and rise in e-commerce adoption will transform the way that businesses operate in the region.

Consumers and businesses in the Middle East are well-prepared for an e-commerce boom and there is still room for substantial growth, according to Bain & Co.

Governments are investing accordingly in digital infrastructure – Saudi Arabia is building 14 fully automated smart warehouses in Jeddah as part of a public-private sector partnership.

Meanwhile, the UAE is doubling down on its multi-billion e-commerce market with a bold ambition to become a cashless society.

The Middle East is taking bold steps towards economic diversification, recognizing the importance of moving away from hydrocarbons and investing in new industries.

Increasing digitization and the widespread adoption of emerging technologies will be at the heart of this shift.

There will undoubtedly be significant challenges ahead but, if Middle Eastern countries can adapt to these megatrends and follow through on their ambitious plans for diversification, they will succeed in creating a more prosperous and resilient region.