Saudi Arabia’s Duba renamed ‘Port of NEOM’

Jeddah - Yasmine El Tohamy - RIYADH: Saudi Arabia’s non-oil sector is projected to grow 4.7 percent in 2023, according to the World Bank, as the Kingdom’s Vision 2030 objective to diversify the economy away from oil gathers strength. 

This forecast comes despite an anticipated slowdown of Gulf Cooperation Council economies amid lower oil and gas returns and sluggish global economic growth.

GCC countries’ gross domestic product is estimated to grow by 2.5 percent in 2023 and 3.2 percent in 2024, as opposed to the 7.3 percent figure witnessed in 2022.  

A predicted 1.3 percent contraction in hydrocarbon GDP will be the main driver of the slowdown in the Gulf region, noted the report.  

This is largely attributed to last month’s production cut announcement from the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, in addition to the global economic decline.  

Nevertheless, GCC non-oil sector growth is expected to hit 4.6 percent in 2023 — backed by private consumption, fixed investments and looser fiscal policy — thus easing the decline in oil activities.  

“Improvement to the business climate and competitiveness, and the overall improvements in female labor force participation in the GCC countries, especially in Saudi Arabia, have all paid off, though further diversification efforts are still needed and is underway,” said the World Bank.   

Following its 8.7 percent growth in 2022, Saudi Arabia’s GDP will reach 2.2 percent by the end of this year as the oil sector’s contribution to GDP is forecast to drop 2 percent.  

In March, the regional director for the GCC at the World Bank noted that Gulf countries will see double the global level of economic growth this year — with Saudi Arabia and the UAE leading the way.  

Issam Abu Suleiman stated that Gulf countries are forecast to surge 3.7 percent in 2023 — higher than the 2.5 percent World Bank estimate.  

He indicated that the GCC region in general performed very well after the pandemic and the biggest challenge was the vaccination operations which were completed quickly compared to other countries in the region, according to Argaam. 

According to a report published by PwC in January, the slowdown in global economic growth is expected to continue throughout 2023 but the outlook for the GCC is positive.  

“Forecasts for the GCC in 2023 are more upbeat, with 3.6 percent GDP growth expected this year. Although the region will not be completely immune to a global slowdown, there are a number of reasons to be optimistic,” said the report.  

It also stated that oil prices and energy demand in 2023 will likely increase or stabilize at last year’s level, which will support GCC economies.  

“The 2023 outlook for the GCC region appears more upbeat in comparison to the rest of the world, supported by relatively high oil prices and growth in the non-oil economy, as well as moderating inflation,” the report concluded.  

According to a UN report released on Tuesday, global economic growth is projected to be 2.3 percent in 2023, up 0.4 percentage points from a January forecast, but the prediction for 2024 has dropped 0.2 percentage points to 2.5 percent.

“Despite this uptick, the growth rate is still well below the average growth rate in the two decades before the pandemic of 3.1 percent,” said the World Economic Situation and Prospects report issued by the UN Department of Economic and Social Affairs.