Gulf Cooperation Council (GCC) countries are expected to rebound by 2.1 percent this year, supported by oil prices rise, ease in COVID-19-driven restrictions and regional governments’ preparation for major events, according to the Institute of Chartered Accountants of England and Wales (ICAEW).
Preparation for various regional events such as Expo 2020 Dubai and the 2022 Fifa World Cup in Qatar, and spending by Saudi Arabia’s sovereign wealth fund Public Investment Fund (PIF) would support growth in the GCC region.
The region’s economies are also in a good position to capitalize on the travel demand when the rest of the world opens up, according to the ICAEW report.
“The rise in the oil price has boosted revenue prospects for GCC producers, which derive 40 percent to 90 percent of total fiscal income from oil. Higher oil revenue gives governments more scope to support post-pandemic recoveries without undermining efforts aimed at improving medium-term fiscal sustainability.”
Even though the GCC region is healing, the oil production cuts are weighing on output and new outbreaks have forced tighter lockdown measures in recent weeks, disrupting the recovery process, the report points out.
Given the high reliance on the oil sector for growth (both direct and indirect) and vulnerability to rising temperatures, climate change is an increasingly important issue in the GCC region.
In the wider Middle East, the report said that the region continues to face challenges posed by the COVID-19, with many restrictions remaining in place, but there are increasing signs that an economic recovery is underway. The global demand has continued to improve, supporting the outlook for oil prices and trade.
“We now expect regional GDP or gross domestic product to grow by 2.4 percent this year, only 0.1pp lower than we projected three months ago and similar to the average growth trajectory in the last decade. We estimate the economy shrank by 4.4 percent in 2020,” the report said.
Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia (MEASA), said the outlook for most Middle Eastern economies is positive this quarter, but keeping coronavirus levels low will be essential to ensure the return to growth.