The Middle East’s non-oil growth looks robust as the region continues to focus on the next phase of diversification and development, supported by government investment and reforms to attract private capital, according to the latest PwC Middle East Economy Watch.
Part-year data for 2023 indicates that several nations in the region are outpacing International Monetary Fund (IMF) estimates. The UAE saw a 5.9% year-on-year (YoY) growth in the first half, propelled by Abu Dhabi’s 8.6% YoY rise in the first nine months (with Q3 federal-level data pending) and Dubai’s sustained diversified expansion.
The IMF’s October 2023 estimates see GCC non-oil growth averaging 3.9% for the year, slightly lower than its 4.2% estimate for 2023.
With uncertainty around oil demand growth and the risk of increased supply from non-OPEC+ countries, OPEC+ members agreed to extend production cuts into the second quarter, suggesting a likely contraction in the oil sector in 2024 compared to last year.
According to the global consultancy, Saudi Arabia’s decision to pause oil production capacity expansion will redirect capital towards alternative energy projects, including gas and renewables.
“Oil demand plays a key role in influencing the growth of oil-exporting Middle East countries. Nonetheless, strong growth in the non-oil sector is expected to counterbalance these impacts,” said Richard Boxshall, Partner and Chief Economist, PwC Middle East.
In 2023, green bond and sukuk issuances in the Middle East doubled to $24 billion, led by the UAE and Saudi Arabia, with momentum continuing into 2024.  
“The region is increasingly focusing on sustainability, aligning with net zero ambitions and the imperative for economic diversification,” stated Stephen Anderson, Partner, Middle East Strategy Leader, PwC Middle East.

The growth in green finance is a strong indication of this focus and has the potential to enhance the region’s appeal to foreign investors, he added.
Meanwhile, inflation cooled in the GCC last year, with PwC composite for the region averaging 2.6% and ending the year at 1.7% YoY, down from a post-Covid high of 4.3% in July 2022.

Subsidies are one of the reasons why inflation in the GCC did not spike to the same heights seen in some other major economies, the consultancy noted.

(Editing by Seban Scaria