The international financial institution, World Bank has revealed that the economies of the Gulf Cooperation Council (GCC) are projected to expand by 5.9 percent overall in 2022, with this recovery likely to continue in the long term, driven by the hydrocarbon and non-hydrocarbon sectors.
The latest issue of the World Bank’s Gulf Economic Update (GEU), “Achieving Climate Change Pledges,” describes them as rebounding robustly from the COVID-19 pandemic in 2021 and at the beginning of 2022.
According to the statement, the recovery was driven by the widespread vaccination rollout across the GCC, the relaxation of pandemic restrictions, and developments in the hydrocarbon market. Further, the fiscal deficits have markedly improved, with the GCC external balance reaching pre-pandemic levels in 2021 as energy prices and export earnings strengthened.
As major hydrocarbon exporters, GCC countries may also benefit from changes in the energy markets brought about by the war in Ukraine. These countries may see strong fiscal and external surpluses, which could help spur consumer confidence and investments.
“As GCC countries commit to the net-zero objectives laid out in their pledges and strategies, it is important to restructure energy and water subsidies and address the GCC’s challenge of moving to a more sustainable growth model less hydrocarbon dependent and managing the transition to a global low-carbon economic environment that risk to see their oil revenues reduced in the next few decades.”
The special chapter of the GEU discusses opportunities to restructure energy subsidies in the region, as well as opportunities that exist for the GCC countries to become renewable energy powerhouses by diversifying into green technologies.
GCC Countries Outlook
- Bahrain: Bahrain’s economy is expected to accelerate in 2022 to 3.5 percent, boosted by surging energy prices. Recovery in the non-oil economy will be driven by expansion in the transportation and communication sectors, as well as increased agriculture and fishing.
- Kuwait: Economic growth in 2022 is expected to increase to 5.7 percent, due to higher oil output as OPEC+ cuts are phased out and domestic demand strengthens.
- Oman: Growth in 2022 is projected to reach 5.6 percent, underpinned by more than 8 percent growth in the hydrocarbon sector, while the non-oil economy continues to grow by more than 2 percent as faster vaccine rollout strengthens domestic activity.
- Qatar: Real GDP is estimated to rise in 2022 to 4.9 percent on the heels of boosted hydrocarbon exports, while growth in private consumption may be slightly lower, at 4.8 percent, driven by a potential dilution of World Cup proceeds and higher prices.
- Saudi Arabia: Growth is expected to accelerate to 7 percent in 2022, driven by stronger oil output following OPEC+ production cuts and continued growth in non-oil sectors, and supported by stronger consumption, increased tourism, and higher domestic capital spending.
- United Arab Emirates (UAE): Economic recovery is projected to continue in 2022, with growth anticipated to reach 4.7 percent driven by oil and non-oil sectors.