The latest <\/b>Economic Insight<\/b> report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, predicts a slow recovery for the region in 2024 due to extended oil production curbs. The GCC growth forecast has been revised down to 2.2% from 2.7% three months ago, though non-energy sectors remain resilient, including in Bahrain and Qatar.\u00a0<\/b><\/p>\n
The OPEC+ group\u2019s extension of voluntary output cuts through Q3 implies a delayed recovery in GCC energy sectors. GCC oil output will now shrink by 2.6% this year instead of the 1.3% expansion forecasted three months ago. Saudi Arabia, which is cutting production to the greatest extent, will see oil activities contract by 5% this year, down from a predicted growth of 0.7% three months ago. However, as voluntary production cuts are reversed in 2025, energy sectors will begin making positive contributions to GCC growth.<\/span><\/p>\n Qatar\u2019s GDP growth projection for this year stands at 2.2% and is expected to rise to 2.9% in 2025. In contrast, Bahrain\u2019s GDP growth is 3.1% this year, but is expected to slow to 1.4% in 2025. Since Qatar is not involved in the <\/span>OPEC+ production quotas, its gas sector is a priority, with authorities doubling down on the North Field gas expansion project, promising a positive medium-term impact. Bahrain, on the other hand, continues to diversify its economy and reduce reliance on oil revenues. Last year its non-oil growth grew by 3.4%, accounting for nearly 84% of GDP.\u00a0<\/span><\/p>\n High-frequency data paints a positive outlook for non-energy sectors across the GCC. In Saudi Arabia, investments are expected to flow into key sectors supporting giga-projects, including construction, manufacturing, and transportation. Strong momentum in the sports and entertainment sector will also be seen as the country\u2019s transformation continues. The hospitality sector will likely follow, with tourism remaining key to Saudi\u2019s growth agenda. Tourism is a strategic sector in other countries too, and will remain a key growth driver. Tourism activity has rebounded strongly, with record visitor numbers across the GCC in 2023, extending into this year.\u00a0<\/span><\/p>\n Non-oil economies will continue to grow despite the GCC\u2019s fiscal positions deteriorating. Saudi Arabia, Bahrain, and Kuwait will likely see budget deficits this year and next as the current oil price level is below the fiscal breakeven point. However, the overall GCC budget position will likely remain in surplus, bolstered by strong financial standings and favourable credit ratings, allowing continued access to funding from capital markets and IPOs.\u00a0<\/span><\/p>\n Hanadi Khalife, Head of Middle East<\/b>, ICAEW<\/b>,<\/span> said: \u201cWhile geopolitical risks present headwinds for the GCC and wider Middle East, we are encouraged by the ongoing commitment to diversification and sustainability targets. <\/span>Qatar, for example, became the first GCC sovereign to issue green bonds despite not having explicit net-zero targets. Bahrain is also aligning its non-oil economic growth with its Economic Vision 2030 and COP28 commitments to reduce carbon emissions by 30% by 2035.\u201d<\/span><\/p>\n Scott Livermore, ICAEW Economic Advisor, and Chief Economist and Managing Director, Oxford Economics Middle East<\/b>, said: \u201cAlthough the region faces escalating pressures amid slowing global economies, the GCC remains relatively positive due to strong bilateral deals and investment. <\/span>Qatar recently signed a 20-year supply contract with India for 7.5 million tonnes of liquefied natural gas annually, and a 27-year contract with Taiwan for 4 million tonnes. \u201cBahrain has also seen significant investment growth following the launch of the Golden License initiative in April 2023, which requires a minimum investment of US$50mn and the creation of at least 500 jobs. Bahrain\u2019s financial services sector contributed nearly 18% of GDP, surpassing oil, which contributed 16%.\u201d<\/span><\/p>\n The GCC inflation forecast for 2024 has been lowered by 0.3 percentage points to 2.2% this year, with a further slowdown to 2.1% expected next year. Excluding housing rents in some countries, notably Saudi Arabia, inflationary pressures remain contained, with rates below 2% in all GCC countries except Kuwait and the UAE.<\/span><\/p>\n Given the exchange rate pegs against the US dollar, GCC central banks tend to track the US Federal Reserve’s policy rates. The US Federal Reserve is expected to begin gradually cutting policy rates in September, totalling a 150bps reduction by the end of 2025.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, predicts a slow recovery for the region in 2024 due to extended oil production curbs. The GCC growth forecast has been revised down to 2.2% from 2.7% three months ago, though non-energy sectors remain resilient, including in Bahrain […]<\/p>\n","protected":false},"author":5,"featured_media":3946,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","footnotes":""},"categories":[39,59,130,87,15,3718],"tags":[],"class_list":["post-3945","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-economy-en","category-energy-en","category-featured-en","category-gcc-en","category-press-releases","category-qatar"],"yoast_head":"\n