Middle East and North Africa (MENA): Countries and Economy

What Is MENA?

MENA is an acronym for the Middle East and North Africa (MENA) region. The region is typically considered to include around 19 countries, but the definition can be stretched to include up to 27. The World Bank includes 21 countries as part of MENA and based on their 2020 population reports, the region accounts for approximately 6% of the world's population.

According to OPEC data, the MENA region holds more than half of the world's oil reserves, and two-fifths of the world's natural gas reserves. Due to the region's substantial petroleum and natural gas production, MENA is an important source of global economic and energy resources.

Understanding MENA

Many of the 13 OPEC nations are within the MENA region. While there is no standardized list of countries included in the MENA region, the term typically includes the area from Morocco in northwest Africa to Iran in southwest Asia and down to Sudan in Africa.

The following countries are often included in the MENA region (not an exhaustive list): Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Malta, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates, Palestine, and Yemen.

Some Key MENA Economies

Kingdom of Saudi Arabia

By far the largest economy in the MENA region, the Kingdom of Saudi Arabia reported a Gross Domestic Product of $833 billion in 2021. The country is highly dependent on petroleum and natural gas, which provide some 90% of the country's export earnings.

Although it controls the world's second-largest proven oil reserves, Saudi Arabia has announced efforts to reduce its dependence on petroleum exports through investments in the technology and tourism sectors.

Islamic Republic of Iran

Iran is the fifth-largest economy in the MENA region. Like Saudi Arabia, petroleum exports play a major role in the country's economy, though it is more diversified than many other oil exporters in the Middle East.

However, Iran is also subject to strict international economic sanctions as a state-sponsor of terrorism, a growing nuclear threat, and perpetrator of cyber intrusions against foreign countries. As a result, it is difficult for Iran's economy to boom. Iran's currency has greatly weakened and sanctions greatly restrict international trade.

State of Israel

With a GDP of $488 billion in 2021, Israel is the second-largest economy in the MENA region, behind the geographically much larger Saudi Arabia. Unlike many of its neighbors, Israel is not an energy exporter; instead, the economy is largely centered around industrial manufacturing, diamond cutting, and high technology. In fact, Israel is ranked among the top-10 of global high-tech ecosystems. Israel has become world renowned as being the “start-up nation” and is the world leader for number of start-ups per capita.

Although it is a comparatively advanced industrial country with high average incomes and a strong currency, Israel's position has often been complicated by geopolitical conflicts with its neighbors.

Egypt

With a 2020 GDP of $365 billion, Egypt represents the largest economy in North Africa as well as the third-largest economy in the MENA region. Following the overthrow of President Hosni Mubarak during the 2011 Arab Spring protests, the Egyptian economy began to undergo significant market reforms, ​which helped attract outside investors and address domestic unemployment. In addition to hydrocarbons, Egypt is a major exporter of textiles and agricultural products.

Investing in the MENA Region

With more than half of the world's proven oil reserves, most investment opportunities in the MENA region are focused on the energy industries. There are many financial products allowing both retail and institutional investors to gain exposure to specific countries' oil and natural gas markets, as well as ETFs that target North Africa, the Middle East, or the MENA region as a whole.

Several MENA economies are deliberately re-orienting their economies to reduce their dependence on fossil fuel exports. For example, the United Arab Emirates has a burgeoning tech sector, and Qatar is expanding into financial services.

There are currently no MENA-specific ETFs in the U.S. that encompass the entire region. Instead, there are several sub-regional or country-specific ETFs that American investors can access. These include:

Note that investors in other countries may have access to more and different MENA-specific funds.

Conflict in the MENA Region

Due to the strategic importance of their oil reserves, countries in the MENA region have been affected by major local conflicts as well as interference by foreign powers.

Notably, the U.S. invasions of Iraq and Afghanistan caused major disruptions in regional economic activity, while the 2011 Arab Spring protests caused a number of revolutions and civil wars, most notably in Libya and Syria, as well as what the World Bank described as "the biggest refugee crisis since World War II." Other conflicts in the area include Israeli clashes with Palestinian terrorists, ongoing wars in Syria, Yemen, Iraq, and Afghanistan, political instability in Lebanon, and a growing rivalry between Iran and Saudi Arabia as regional power.

The Bottom Line

The Middles East and North African region, better known by the acronym MENA, is an important energy resource-rich region of the world. Centrally located between the West and Asia, MENA countries are home to much of the world's oil and natural gas reserves. As emerging markets, investors look to these countries as growth opportunities; however, the risk of regional conflict remains high.