The six countries in the Gulf Co-operation Council (GCC) are projected to rebound and expand 2 percent to about 3 percent this year, while the region’s two largest economies, Saudi Arabia and the UAE, are expected to grow over 4 percent in 2022, as per a quarterly survey by Reuters.
The new forecast is following a steep fall in 2020 after the oil price crash and the impact of the COVID-19 pandemic. Meanwhile, analysts expected Saudi Arabia, the UAE and Kuwait to benefit from an OPEC+ deal agreed recently to boost oil production.
“Our core assumption was that a longer-term deal would be secured, and we raise our 2022 forecasts on the back of the baseline adjustments, which will enable the UAE, Kuwait and Saudi Arabia to raise oil output and their global market share from May 2022,” said Ms. Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB).
The survey, which was carried out through July 5-26, estimates Saudi Arabia’s growth at 2.3 percent this year, down slightly from a prediction of 2.4 percent in a similar poll done three months ago.
The Middle East’s largest economy and world’s largest oil exporter’s gross domestic product (GDP) is also projected to grow 4.3 percent in 2022, an upward revision of 100 basis points (bps). Growth for 2023 is revised up 30 bps to 3.3 percent.
The UAE was projected to expand 2.3 percent this year, unchanged, and 4.2 percent next year and 3.4 percent in 2023, revised up 60 bps and 10 bps respectively, Reuters quarterly survey said.
The forecasts for Kuwait’s 2021 GDP growth were lifted 60 bps to 2.4 percent, while growth next year was boosted 110 bps to 4.6 percent. Growth was seen 10 bps higher in 2023 at 3.0 percent.
As per the survey, Oman was revised up 20 bps to 2.1 percent expected growth this year, up 10 bps to 3.3 percent next year and down 20 bps in 2023 to 2.2 percent. Bahrain’s outlook remained unchanged for this year and next at 2.9 percent, while 2023 growth is 30 bps lower at 2.4 percent.
According to Moody’s report, at least half of the GCC’s state revenues are from hydrocarbons, and diversification away from that will “likely take many years to achieve,” with fiscal diversification likely to follow with additional lag.
“The announced plans to boost hydrocarbon production capacity and government commitments to zero or very low taxes make it unlikely that this reliance will diminish significantly in the coming years, even with some progress in economic diversification, which we expect,” the report said.