Foreign direct investment trends in the Middle East North Africa region

After a decade of rapid growth of foreign direct investment (FDI) into both Gulf Cooperation Council (GCC) states and North Africa, FDI flows face slowdown in 2025 given investor uncertainties reflecting changing US trade policies, lower oil prices, and more gradual development of GCC diversification projects.

S&P Global Market Intelligence expects MENA countries to continue to see the global strategic competition between the US and China and the respective efforts of the two countries to expand their investment footprint in the region as an opportunity to attract foreign investments. The deals announced in the context of US President Donald Trump’s recent trip to Saudi Arabia, the UAE, and Qatar are unlikely to change this multipronged approach.

While GCC countries have emerged as important source countries as well as host countries for foreign investment, the focus of North African countries, including Egypt, Tunisia, and Morocco, is on attracting foreign investment.

US dollar weakness would lower the cost of FDI for international investors from outside the US dollar area — Europe, China, India — and mitigate an FDI slowdown. In particular, a weaker US dollar would support the external competitiveness of GCC countries with currencies pegged to the US dollar. Conversely, currencies not pegged to the US dollar, such as Morocco’s dirham and Tunisia’s dinar, have appreciated recently (in part driven by the euro) weakening their host countries’ competitiveness. The downside risk to the US dollar, which we forecast to depreciate gradually in the near term, is likely to reinforce these impacts within the MENA region.

The nature and sector breakdown of FDI in the region already has migrated from hydrocarbons to areas such as infrastructure, renewable energy, logistics, tourism and construction.

Foreign investments into North Africa’s tourism and renewables sectors will further increase. Morocco has already drawn significant foreign investments to its renewable energy sector in recent years, which provided significant support towards its renewable energy goals. Morocco increased electricity supply from renewables through projects like the Noor Ouarzazate Solar Complex — the world’s largest concentrated solar power facility — and the Tarfaya Wind Farm, one of Africa’s largest. 

The country’s ambitious energy policy aims for renewables to account for 52% of total energy generation by 2030 (up from 24% in 2024) which will continue to boost foreign investment into the sector. Notably, Morocco’s new Investment Charter and incentives — such as tax breaks, subsidies, and public-private partnerships — have made the market highly attractive for international investors.

North Africa’s tourism sector has also drawn interest from foreign investors following the UAE’s US$35 billion investment in Egypt’s Ras El Hekma, the largest FDI deal in the country’s history. North Africa’s tourism sector has rebounded strongly post-pandemic, with international arrivals surpassing pre-2019 levels.

Morocco, for example, recorded a 35% increase in arrivals since 2019, reaching 17.4 million visitors in 2024 and overtaking Egypt as the region’s top destination. Egypt also saw a 21% increase, while Tunisia and Algeria are benefiting from renewed investor interest. Algerian authorities are seeking to capitalize on a sizable untapped potential in the country’s tourism sector, aiming to increase the number of tourists from 3.5 million currently to 12 million by 2030, offering promising investment opportunities.

GCC states have scope to benefit from FDI generated by supply chain adjustments, reflecting their well-trained labor forces, and increasingly attractive investment environments. These factors also will help them attract technology-related investments.

GCC states have made commitments to make sizable FDI into the US economy, although these are spread over extended timeframes. Such outflows are likely to reduce capital available for investment into non-GCC MENA states, but these are still attractive venues for renewable energy and tourism developments. Conversely, mainland China is likely to expand its commitments, on a project-specific focused basis.

GCC states are likely to borrow more to continue diversification, rather than slowing development and curtailing investment opportunities. In the near term, S&P Global Market Intelligence expects a net negative impact on global FDI, mostly from the indirect repercussions of US tariffs — including a weaker oil price outlook and weaker global investor confidence. Lower oil prices — reflecting expectations of weaker oil demand and increasing OPEC supply — are likely to constrain foreign exchange earnings generation capacity of large MENA hydrocarbon exporters, in turn limiting their capacity to act as major investors in other countries within the region.

Investment flows into the region remain subject to adverse conflict-related developments. There continue to be a number of ongoing, unresolved conflicts involving non-state armed groups, civil conflicts, or territorial disputes across the region that are likely to continue to negatively impact confidence in FDI sentiment in the one-year outlook.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.