Mena

mong the many factors shaping the Middle East and North Africa’s regional economy – and therefore its communications market – are oil, conflict and youth.

The oil price slump of 2014 hit the hydrocarbons exporters of the Gulf Cooperation Council (GCC) hard, and they are not recovering fast. In the May update of its Regional Economic Outlook, the International Monetary Fund calls the forecast for the oil market “uncertain”. It notes that prices have risen after last year’s agreement by major oil producing states to cut production, but prices “remain variable”. It says: “The key uncertainties are related to the degree of compliance with the agreement, prospects for higher production by countries either exempt or not participating in it, and lower oil demand given the downside risks to global growth.”

Those uncertainties also affect the rest of the MENA region. While oil exporters’ losses in terms of priceper-barrel could be seen as importing nations’ gains, the reality isn’t that simple. Cheaper energy is offset by the international creep of depressed consumer sentiment, and the loss of remittances from citizens working abroad in the Gulf.

So across the region, advertising and marketing budgets have been cut, both due to decreased sales and the fear of diminished consumer confidence.

This has hit the communications market hard. Media agency Zenith, in its March forecasts for advertising expenditure, notes that MENA is “the clear underperformer” of its various blocs.

Its report says: “We forecast a 9.0 per cent drop in adspend in MENA this year, following a 10.1 per cent decline in 2016. The region’s decline should moderate over time, but we predict no recovery during our forecast period. We expect adspend to shrink 3.2 per cent in 2018 and 1.1 per cent in 2019.”

Over the period 2016-19, Zenith predicts MENA adspend will decline by an average of 4.5 per cent a year. The next worst performer is Japan, with growth of 1.9 per cent.

Most of that loss of adspend comes from traditional media such as television, radio and print. Across the region in the last year, newspapers, television channels and radio stations have closed down. Some of the spend they once received is moving online, though ‘new’ media is not necessarily growing at the same rate ‘old’ channels are declining.

As well as web spend, social media is taking bigger shares of ad budgets, as is influencer marketing. The growth of digital not only reflects changing consumption habits (in its latest Arab Youth Survey, Asda’a Burson Marsteller found that for the first time Facebook has become the main source of news for Arabs aged 18-24) but also media’s ability to be measured.

Both clients and holding company headquarters are demanding more accountability from communications agencies – in terms of return on investment and transparency of business dealings, forecasting and accounting.

As the region’s economy levels out, gone are the days when agencies would grow regardless, hauled up by buoyant GDP growth in their Middle East markets.

The decline of oil has also forced energy-exporting countries to accelerate their diversification efforts to make themselves less reliant on hydrocarbons. This means that while government spending may have been slashed when oil revenues fell, there is a real drive to develop the private sector, and particularly small and medium-sized enterprises and entrepreneurial start-ups. This means there are more accounts out there to be serviced by the communications industry. They are just smaller than the behemoths of old, and more likely to err towards digital spend.

The region is in conflict. From civil unrest to civil war, few countries are wholly unscathed, and Yemen, Libya and Syria are still in business-stopping turmoil. There is also worrying sabre-rattling going on between a Saudi-led bloc of Sunni-ruled GCC countries and Shia Iran, which adds to the mix of geopolitical uncertainty.

Refugees have flooded out of Syria and are putting strain on neighbouring states. They are expensive to host, and compete for jobs with citizens of their host countries. Trade routes are also closed, which affects countries such as Jordan, once reliant on trade with and through both Syria and Iraq.

And with sporadic terror attacks on top of an unfortunate international image of the Middle East as a region at war, tourists are staying away. Fear is not the only factor in a downturn in visitors. Even perceived safer destinations such as the UAE are losing out on tourism spend thanks to a preBrexit Britain’s depressed pound, a Russian rouble that’s still not recovered from sanctions, and a slow economy in China keeping the Renmimbi low against the dollar.

The region is a young one. Huge swathes of the population are aged under 30, which means a lot of people need employment, putting further strain on governments. This youth bulge also affects advertising. The largest audience may be young, but while they are plentiful they are not always rich. So brands need to split their messaging between attracting older customers who can afford their products and younger ones who will form their loyal consumer base in the future.

The MENA region is in an awkward stage. It is slowly growing out of its boom-and-bust adolescence and into a mature middle age as a communications market. And it is becoming populated by a tech-savvy, culturally aware youth who demand more from brands and their advertisers. There can be little doubt that there will continue to be casualties as change takes place. But those who survive will be better off for it.