Q1 2023 VC Performance in the MENA region in light of IMF data Research Brief

The Q1 2023 VC Performance in the MENA region in light of IMF data Research Brief looks at the ongoing global economic events and their impact on MENA's economic indicators and the performance of the VC space.

The IMF recently released its World Economic Outlook, in addition to its Regional Economic Outlook covering the Middle East & Central Asia. As the performance of the VC space is directly related to geopolitical events and macroeconomic fluctuations, and as the flow of events peaked over the past couple of years, it is important to look at the impact of those events on the market. Starting with the pandemic and the recessionary consequences resulting from it due to the restricted business activity, to the stock market volatility early in 2022, followed by the Russian invasion to Ukraine which triggered supply chain disruptions, uptill the banking crisis earlier this year, the factors impacting the VC space were numerous. According to the IMF reports, there is an expectation that economic growth in the MENA region will decrease this year to 3.1%, from an estimated 5.3% in 2022.

The economic soft-landing scenario in the first quarter of this year was disrupted by the recent financial sector turmoil and persistently high inflation. Although the Federal Reserve and some Central Banks in the region have increased interest rates to reduce inflation, underlying price pressures remain resistant. The global economy is experiencing high uncertainty due to various negative events such as COVID, the Russia-Ukraine war, and supply chain disruptions. Despite COVID creating opportunities for new industries in the MENA region, current conditions are causing setbacks for their development. In 2023, the MENA venture capital ecosystem experienced a sluggish start, with funding declining by 13% compared to the previous year and deals dropping by a significant 55% on a yearly basis. During this time, investor appetite in MENA regions was limited, resulting in a reduced interest in funding ventures, except for the occasional MEGA deals.

The IMF’s World Economic Outlook, reveals a significant decrease in growth forecasts for the United Arab Emirates (UAE), Saudi Arabia, and Egypt. The UAE's growth rate is expected to drop from 7.4% in 2022 to 3.5% in 2023, with average inflation slightly decreasing from 4.8% to 3.4% during the same period. Saudi Arabia is expected to report a retreat in growth from 8.7% to 3.1% in 2023, while inflation is forecasted to rise marginally from 2.5% to 2.8%. Egypt's growth rate is predicted to drop from 6.6% to 3.7% in 2023, with inflation rising from 8.5% to 21.6% due to economic instability and exchange rate fluctuations. This economic slowdown has also affected the venture capital (VC) market in the region. While 2022 was a high-performing year for the top three MENA countries, 2023 started slower. All three countries - UAE, Saudi Arabia, and Egypt - experienced YoY declines in the number of transactions in Q1, with Egypt seeing the most significant decline. Although funding saw some positive growth in KSA and Egypt, the increase was mainly a result of $100M+ deals.

What’s In The Brief?

This research brief provides a comprehensive overview of the geopolitical and macroeconomic events that impacted the MENA region in 2022 and 2023 as discussed by the latest World Economic Outlook released by the IMF and how these events reflected on the performance of the Venture Capital market in the region.

Who is it for?

Whether you’re a private investor, a VC, an investment company, a CVC, or working in corporate, this report gives an overview of the ecosystem and caters to a diverse audience including any curious minds who want to use the yearly, quarterly and monthly charts in this report to track investment activity.

You can also see in which country and industry the investment activity focused in terms of deals and capital deployed, allowing you to leverage insights and make wise choices.

The report can also be used by consultants looking to identify technology innovation trends and who will find it valuable to look at the evolution of M&A activity and concentration of acquirers/acquired startups.

Last but not least, government entities searching for investment opportunities will also find valuable information to make informed decisions.

Where is this information from?

The report was 100% created using data from MAGNiTT. MAGNiTT is the leading VC verified data platform and offers a comprehensive directory of technology innovation trends. Our unique SaaS solution includes investment directories listing startup venture funding across the Middle East, Africa, Pakistan, and Turkey, and now Singapore. By using MAGNiTT, you will also get access to market sizing tools to visualize investment growth and trends across various industries, geographies, and stages, as well as comparison tools for benchmarking geographies, industries, and investor performance. Furthermore, MAGNiTT offers exit comparisons by examining mergers and acquisitions.

Learn more about MAGNiTT's Data Methodology.

*This report aggregates and analyses tech startup investments in 17 countries in the Middle East and North Africa - listed alphabetically: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia (KSA), Syria, Tunisia, United Arab Emirates (UAE), and Yemen.

Analytics Reports