Figures released by the United Nations Conference on Trade and Development (UNCTAD) show that foreign direct investment (FDI) in 18 Arab economies totaled $28.3bn in 2017, constituting a decrease of 11.7% from $32.1bn in 2016. FDI inflows to Arab countries accounted for 4.2% of FDI in developing economies and for 2% of global foreign direct investment in 2017. The UAE was the largest recipient of FDI in the region with $10.4bn, or 36.6% of total FDI in Arab countries, followed by Egypt with $7.4bn (26.1%), Morocco with $2.7bn (9.4%) and Lebanon with $2.6bn (9.3%); while Iraq and Yemen posted negative flows of -$5.03bn and -$270m, respectively, in 2017. In parallel, FDI in Bahrain rose by 2.1 times in 2017, followed by flows to Qatar (+27.4%), Morocco (+23%), Mauritania (+21.5%), Oman (+11.1%), the UAE (+7.8%), Jordan (+7.2%), Djibouti (+3.1%), Lebanon (+0.7%) and Sudan (+0.1%). In contrast, inflows to Saudi Arabia fell by 81% in 2017, followed by Palestine (-31.5%), Kuwait (-28.2%), Algeria (-26.4%), Egypt (-8.8%) and Tunisia (-0.6%). Further, FDI inflows to the 18 Arab countries were equivalent to 1.2% of their aggregate GDP in 2017, down from 1.4% of GDP in 2016. FDI inflows to Djibouti were equivalent to 8.1% of its GDP last year, followed by Mauritania (6.4% of GDP) and Lebanon (5.1% of GDP). 
Source: UNCTAD, International Monetary Fund, Byblos Research

European credit insurance group Credendo considered that Gulf Cooperation Council (GCC) countries would have to continue to implement reforms in coming years, but at a gradual pace that would not hurt economic growth and employment. It indicated that GCC countries have implemented fiscal consolidation measures in recent years, which allowed them to improve their fiscal balances. It noted that all GCC economies implemented some form of public wage or employment freeze, as well as energy subsidy reforms. On the revenues side, it noted that Saudi Arabia and the UAE have already introduced the value-added tax in January 2018, while the remaining GCC economies are expected to follow suit in 2019. It added that the region's current account balance shifted to a surplus of $30bn in 2017 as a result of capital spending reductions, lower imports and higher global oil prices. However, it pointed out that fiscal consolidation measures in GCC economies significantly weighed on their GDP growth, given the size of their public sectors and the strong correlation of non-oil growth to government spending.

Further, Credendo expected growth in Kuwait, the UAE and Saudi Arabia to recover slightly in 2018, given their large financial resources and buffers that will allow them to continue to implement reforms at a gradual pace. In parallel, it considered the economic situation of Bahrain and Oman to be more critical. It anticipated that the combination of Bahrain's wide fiscal deficit, high public debt level, large refinancing needs and the absence of reforms, could potentially lead to a significant loss in confidence, which would weigh heavily on the Bahraini economy. Also, it pointed out that Oman would need to narrow its fiscal deficit, but would need to implement economic reforms to diversify the economy away from the hydrocarbon sector. It added that the adoption of significant adjustments to public spending in Bahrain and Oman could weigh on the countries' economic growth in the short term, but would support long-term growth.
Source: Credendo

IHS Markit indicated that Syria's real GDP contracted by 58.3% between 2011 and 2016, and that economic activity retreated by an annual average of 12.4% during the 2011-16 period. Also, it indicated that economic activity in Syria continued to shrink but at a slower rate between 2014 and 2016, with real GDP contraction slowing down from 14.7% in 2014 to 6.1% in 2015 and 4% in 2016, according to official national accounts. Further, it estimated Syria's economic contraction at about 2.3% in 2017. It said that activity in wholesale & retail trade contracted by an annual average of 21% in real terms during the 2011-16 period, followed by mining, manufacturing & utilities (-18.2%), the agricultural sector (-9.3%), transportation & communications (-6.7%) and government services (-0.5%). In parallel, IHS estimated that the country's mining, manufacturing & utilities sector has expanded in 2017, while it considered the transport & communications sector to have registered growth last year. It added that the wholesale & retail trade sector is likely to have recorded a more moderate contraction in 2017. In parallel, IHS forecast Syria's real GDP to contract by 0.3% in 2018, and said that it remains unclear when the economy will stabilize, given the massive infrastructure damage and the huge financing needs for the reconstruction phase in coming years.
Source: IHS Markit, Central Bank of Syria