The GCC economies will grow at a slower pace in 2023 compared to the previous year weighed by lower earnings from oil and gas and a global economic slowdown, according to the World Bank.
In its latest World Bank Gulf Economic Update (GEU), the financial institution said the GCC is expected to grow by 2.5% in 2023 and 3.2% in 2024, compared with a GDP growth of 7.3% in 2022, which was fuelled by a strong increase in oil production for most of that year.
The weaker performance is driven primarily by lower hydrocarbon GDP, which is expected to contract by 1.3% in 2023 after the OPEC+ April 2023 production cut announcement and the global economic slowdown.
However, robust growth in the non-oil sectors, which is anticipated to reach 4.6% in 2023, "will dampen the shortfall in hydrocarbon activities, driven primarily by private consumption, fixed investments, and looser fiscal policy in response to 2023’s relatively high oil revenues".
The UAE’s economic growth in 2023 is expected to slow compared to 2022 due to a decline in global economic activity, contraction in oil production, and tightening financial conditions.
Accordingly, real GDP is projected to grow by 2.8% in 2023 as oil activity growth declines 2.5%. However, a strong non-oil sector growth of 4.8% will soften the "contraction in oil activities, driven by robust domestic demand, particularly in the tourism, real estate, construction, transportation, and manufacturing sectors".
Meanwhile, the UAE Central Bank in March said the economy expanded 7.6% in 2022, about double that in the previous year. According to earlier World Bank reports, the UAE economy grew 3.9% in 2021.
Saudi Arabia, which was the fastest growing economy among the Group of 20, will see GDP growth fall to 2.2 in 2023 as oil production retreats on the back of OPEC+ agreed production cuts and oil sector GDP contracts by 2%, according to the GEU.
"However, with oil prices remaining at relatively high levels, loose fiscal policy and robust private credit growth are expected to cushion the contraction in the oil sector." As a result, non-oil sectors are anticipated to grow by 4.7% in 2023.
In Qatar, real GDP is estimated to slow down to 3.3% in 2023 after the strong performance registered in 2022, with the hydrocarbon sector expanding by 0.8%.
Kuwait's economic growth is expected to slow to 1.3% in 2023 in response to a more cautious OPEC+ production approach and sluggish global economic activity. The oil sector is anticipated to contract by 2.2% in 2023
In Bahrain, growth is projected to moderate to 2.7% in 2023 before averaging 3.2% during 2024-25 as fiscal adjustments continue.
Oman’s economy is forecast to continue to grow, but at a slower pace, driven primarily by accelerated implementation of structural reforms under Vision 2040. Overall growth is projected to moderate to 1.5% in 2023 reflecting softening global demand, the report said.
(Reporting by Brinda Darasha; editing by Seban Scaria)