A regional economic slowdown, brought on by conflict and uncertainty, arrived as early as late February this year, says Fadi Ghandour, the entrepreneur behind logistics giant Aramex and Chairman of Wamda. He describes this period as an “early summer” for the Gulf, a time when business activity typically softens. However, Ghandour predicts that once stability returns, the UAE’s recovery will be sharp, following a “hockey stick” growth trajectory.
Quick Facts
- Economic slowdown began in late February due to conflict.
- Foreign capital inflows have paused amid regional uncertainty.
- Ghandour predicts a sharp, “hockey stick” recovery post-crisis.
Geography Trumps Everything Else
“Geography trumps everything else,” Ghandour states, highlighting how the Gulf has been inevitably drawn into the regional conflict. This reality, he argues, makes strong regional relationships and operational resilience more critical than ever.
The crisis has exposed concentration risks, such as an early Amazon Web Services outage following drone strikes. For Ghandour, this underscores a fundamental business lesson.
“The ultimate lesson of any crisis is redundancy, meaning you cannot be dependent on one data or cloud provider. You have to diversify your geography and your relationships with different suppliers,” he explains. He notes that startups that had already diversified their supply chains are the ones best weathering the current storm.
Foreign Capital Pauses, Local Investors Hold Firm
The conflict has predictably cooled capital inflows. As consumption slows in the UAE’s service-driven economy, funding has been put on hold, particularly from international investors who historically retreat first during regional shocks.
“I think that [foreign investment] is off the table now until they find that the situation settles down,” Ghandour says. “By definition, capital is always scared.”
This caution is felt across the board, impacting later-stage rounds that rely heavily on international capital and tightening the pipeline for early-stage companies as investors focus on their existing portfolios. The result, Ghandour warns, is that some startups dependent on fresh funding will fail.
Despite this foreign pullback, Ghandour emphasizes that the region’s startup ecosystem is built on a domestic foundation. “The foreign investors tagged along with us, but we built the ecosystem – local investors, the private sector, the family offices of the region, the sovereign wealth funds.”
The Coming “Hockey Stick” Recovery
Looking ahead, Ghandour envisions the UAE’s next growth phase resembling a hockey stick. The current slowdown represents the flat part of the “blade.” He expects the “inflection point”—an initial burst of growth—to begin around September-October as residents return and business activity resumes.
This will be followed by the “handle,” representing a period of sustained and expanding upward growth. Ghandour points to similar recovery patterns following the 2008 financial crisis and the 2020 pandemic.
However, he offers a crucial caveat for this optimistic forecast. The recovery no longer depends on when the crisis ends, but how it is resolved.
“There needs to be a full settlement. If there is a limbo, I don’t think that bodes well for the region,” he concludes. “We can’t stay somewhere in the middle between solutions and no solutions or partial peace and partial ceasefires.”
About Wamda
Wamda is a leading platform aimed at accelerating entrepreneurship ecosystems across the Middle East and North Africa. It consists of a venture capital arm, Wamda Capital, that invests in high-growth technology startups, alongside a media and research arm that provides insights and community programmes to support founders and innovators.
Source: AGBI
