The World Bank expects Gulf economies to contract by an average of 4.3 per cent this year, cutting its April forecast by 5.7 percentage points. Against that backdrop, French lender Natixis Corporate and Investment Banking says it still expects double-digit growth in its Middle East and Asia business this year and next.
The Iran war began on February 28 and has deepened economic uncertainty across the region. All-out hostilities halted in early April. But repeated attempts to reach a permanent agreement have failed, leaving businesses, governments and ordinary households in limbo.
An Economy Under Strain
The International Monetary Fund also expects the region’s oil-rich economies to contract this year, followed by a strong recovery next year. Managing director Kristalina Georgieva says that rebound depends on shipping operations returning to normal.
Regional debt-capital-market deal volume has dropped by about 10 per cent this year. Bruno Le Saint, Natixis CIB’s chief executive for Asia Pacific and Middle East, called the market “relatively resilient.” He said borrowers’ reluctance to tap markets reflects high yields and rates, not a lack of liquidity. “I don’t think that our clients are in any stress to find liquidity,” he said. “Many of them are just waiting to see better conditions or to tap a new pool of liquidity.”
Not everyone can afford to wait. Borrowers with deep reserves can sit out the downturn, turn to other funding options or draw on their own liquidity. The article offers a banker’s-eye view of a region where contraction is measured in percentage points of GDP. It doesn’t say who bears the cost as economies shrink, but the forecasts make clear that the damage is real.
Banking on Expansion
Le Saint sounded upbeat. “In the overall region, we want to grow in double digits on average. This is what we’ve been doing over the past years and going forward we’ll keep that pace,” he told The National. Natixis hopes to approach 20 per cent growth in the next two to four years, though he said that also depends on how quickly the rest of the business expands.
The Paris-based company belongs to Groupe BPCE, the eurozone’s fourth-largest banking group, and operates from the Dubai International Financial Centre. It employs 80 people in Dubai and plans to add more. “I think it’s important because, in the context of the current situation, I don’t think there have been many international banks growing staff in this region,” Le Saint said.
The UAE and Saudi Arabia are its two largest regional markets. In Saudi Arabia, where Natixis operates through Natixis Saudi Arabia Investment Company, it wants to keep growing. “We still think that we are underinvested in Saudi Arabia,” Le Saint said. The kingdom’s Vision 2030 agenda matches the bank’s expertise in telecoms, energy, infrastructure, metals and mining. Turkey is also under consideration. “How do we grow there? It’s under exploration for now, but these are the questions we are asking ourselves,” he said.
Betting on the Duration of the War
Le Saint said he was “quite confident” despite contraction in some regional economies. “We have not yet reached our natural market share,” he said, adding that reaching it gets harder when the market shrinks. He also offered a caveat. “Of course, if the conflict stays for the next two to three years, what I say might at some point be revisited. But for the foreseeable future, for the next year, I’m very optimistic that we will be growing 10 per cent at least.”
He framed the strategy in competitive terms: “We are expanding, we are investing, so we are capturing market share at a time where not everyone has full attention on growing the business here, which I think is quite exciting.”
Natixis is also eyeing capital flows from Asia. “Chinese banks are coming back in the region and are investing massively, especially to support probably, the need to source and help the flow of energy to China,” Le Saint said. Natixis CIB is celebrating its 20th anniversary. It brought its Asia and Middle East operations together at the beginning of last year. The combined platform represents more than 15 per cent of its overall business, and the bank wants to raise that share to 20 per cent or more.
Why This Matters: This business story also carries a stark message about the cost of a war that has stalled rather than ended. Hostilities stopped in early April, yet repeated failures to secure a permanent agreement leave the region’s economic outlook hostage to events outside any banker’s control. Le Saint says his optimism could be “revisited” if the conflict drags on for two to three years. Contracting economies tend to hit wage earners and vulnerable people hardest, while a recovery that depends on shipping returning to normal is only as secure as the diplomacy behind it. Investors may find openings in the gap. The question for the region’s people is how long that gap stays open.