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Jeddah - Yasmine El Tohamy - RIYADH: The Gulf Cooperation Council economy is estimated to grow by 3.6 percent in 2024 and 3.7 percent in 2025, according to the World Bank.
The recent Gulf Economic Update report by the WB revealed that the GCC is set to grow by 1 percent in 2023 before picking up in the following two years.
This year’s weaker performance is driven primarily by lower oil sector activities, which are expected to contract by 3.9 percent, to reflect the successive production cuts by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, and the global economic slowdown, according to the report.
However, the reduction in oil sector activities will be compensated for by the non-oil sectors, which are expected to grow by 3.9 percent in 2023 and 3.4 percent in the medium term, supported by sustained private consumption, strategic fixed investments, and accommodative fiscal policy.
World Bank Country Director for the GCC, Safaa El Tayeb El-Kogali, stated: “To maintain this positive trajectory, GCC countries must continue to exercise prudent macroeconomic management, stay committed to structural reforms, and focus on increasing non-oil exports.”
She added: “However, it is important to acknowledge the downside risks that persist. The current conflict in the Middle East poses significant risks to the region and the GCC outlook, especially if it extends or involves other regional players. As a result, global oil markets are already witnessing higher volatility.”
The latest issue of the GEU report, titled “Structural Reforms and Shifting Social Norms to Increase Women’s Labor Force Participation,” stated that the diversification efforts in the GCC region are paying off but more reforms are still needed.
Khaled Al-Hmoud, a senior economist at the World Bank, said: “The region has shown notable improvements in the performance of the non-oil sectors despite the downturn in oil production during most of 2023.”
According to the report, the Saudi private sector workforce has grown steadily, reaching 2.6 million in early 2023. Additionally, the labor force participation of Saudi women more than doubled in six years, from 17.4 percent in early 2017 to 36 percent in the first quarter of 2023.
Non-oil sectors in Saudi Arabia are expected to cushion the contraction, growing at 4.3 percent. The oil sector is expected to contract by 8.4 percent during 2023 to reflect oil production curbs agreed upon within the OPEC+ alliance.
As a result, the Kingdom’s overall gross domestic product will show a contraction of 0.5 percent in 2023 before reporting a recovery of 4.1 percent in 2024 to reflect expansions of oil and non-oil sectors.
The report added that growth in Bahrain is estimated to moderate to 2.8 percent in 2023, while the non-oil sector remains the key driver for development.
The hydrocarbon sector is also expected to grow by 0.1 percent during 2023-24, while the non-hydrocarbon sectors will continue expanding at nearly 4 percent, supported by the recovery in the tourism and service sectors and the continuation of infrastructure projects.
Kuwaiti economic growth is projected to decrease by 0.8 percent in 2023 due to a dip in oil output. Oil GDP growth is expected to contract by 3.8 percent in 2023 but is anticipated to recover in 2024.
The non-oil sector is expected to rise by 5.2 percent, supported by private consumption and loose fiscal policy.
Oman’s economy is estimated to slow down in 2023, but it is anticipated to strengthen over the medium-term. Overall progression is projected to decelerate to 1.4 percent in 2023 as oil output falls, while non-oil sectors are expected to support growth, rising by over 2 percent.
Real GDP growth in Qatar is likely to decelerate to 2.8 percent in 2023, maintaining this rate in the medium-term. Despite the weakening of the construction sector and tighter monetary policy, robust growth is anticipated in the non-hydrocarbon sectors, reaching 3.6 percent, propelled by thriving tourist arrivals and large events.
Qatar’s standing as a global sporting hub will be further reinforced by an additional 14 major sporting events during 2023.
Meanwhile, the hydrocarbon sector is estimated to grow 1.3 percent in 2023. The UAE’s economic activity is anticipated to slow down in 2023 to 3.4 percent. Oil GDP growth is projected at 0.7 percent in 2023 but it is likely to recover strongly in 2024.
On the other hand, non-oil output is forecast to support economic activity in 2023, growing at 4.5 percent.
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