Global economic consultancy Fitch Solutions has forecast strong growth prospects for the Gulf Cooperation Council (GCC) countries in 2022.
The company, which is a branch of the “Fitch” credit agency, expected growth to accelerate from 3 percent in 2021 to 6.6 percent, which is the highest growth since 2011.
In a summary of the most prominent growth prospects contained in the report, which was reviewed by Economy Middle East, here’s the following:
– The strong rise in hydrocarbon production and the strong recovery of tourism activity are expected to support net exports, which will be the main driver in the UAE, Kuwait, and Oman
– The rise in oil prices and the diversification of sources of economic activity would support investment in the GCC bloc, and it would be the main driver in Saudi Arabia, Qatar, and Bahrain.
– Private consumption will continue to recover in light of the normalization of economic activity, but it will face headwinds due to rising inflation in the GCC countries.
Looking ahead, growth will decline to 3.7 percent in 2023 in light of declining oil production and tightening financial conditions.
However, economic activity in 2023 will remain at higher levels than it was before the Corona pandemic, at a time when oil price hikes will continue to support both private consumption and investment.
Fitch Solution indicates that real economic growth in Saudi Arabia will accelerate from 3.2 percent in 2021 to 7.6 percent, one of the fastest growth rates in emerging markets.
“Fixed investment will be the main engine of growth, as high oil prices will lead to strong performance of the non-oil economy and support investment in the construction and industrial sectors. The investment momentum will remain strong until the end of the year because high oil prices will improve the liquidity of government investment institutions, which would speed up the implementation of mega projects,” according to “Fitch Solutions.”
The agency added that easing the restrictions of “OPEC +” will allow an increase in oil production in Saudi Arabia by 12.1 percent in 2022, which is positive for exports and for general economic growth.
Fitch Solutions expects economic growth in the UAE to accelerate from 3.7 percent to 6.2 percent, the fastest since 2011.
“The rapid recovery of the service sector, strong domestic consumption, and rising oil production will contribute to strong economic activity,” the company said.
In addition, the increase in hydrocarbon production will be the main driver of growth in Abu Dhabi to 7.4 percent in 2022. The company expects the production of growth in the UAE to grow by 12.8 percent in 2022.
The continued recovery of the tourism sector and domestic consumption will also boost the achievement of 4.5 percent growth in Dubai this year.
According to “Fitch Solution”, real economic growth in Qatar will achieve a jump from 1.5 percent in 2021 to 4.3 percent in 2022, given that oil revenues will be fed into stronger investment activity in the oil and non-oil sectors.
The non-oil economy will continue to strengthen, benefiting from high oil prices and preparations to host FIFA matches in November and December.
Fitch Solutions expects growth in Kuwait to accelerate from 1.2 percent in 2021 to 6.7 percent in 2022.
This growth is due to the strong performance of the oil sector, while the growth of oil production will contribute to raising oil exports. As for the rise in oil prices, it will contribute to the non-oil economy.
The easing of supply restrictions from OPEC + will allow oil production to grow by 12.5 percent in 2022.
Economic growth in the Sultanate of Oman is expected to rise from 3 percent in 2021 to 4.8 percent in 2022.
Hydrocarbon-related activity will be the main driver of economic activity, while Fitch Solutions expects it to increase by 7.6 percent in 2022.
Higher hydrocarbon revenues will allow the government to increase subsidy programs that will ease inflationary pressures.
Growth in Bahrain will accelerate from 2.2 percent in 2021 to 3.8 percent in 2022, an increase from the 2010-2019 average (3.4 percent).
Non-oil activity will remain the main driver of growth, at a time when the weak growth of hydrocarbon production will extend to the oil sector.
This is confirmed by the data for the first half of the year, as the non-oil sector expanded by 7.8 percent on an annual basis, and more than compensated for the 4.7 percent decline on an annual basis for the oil sector, which led to a substantial growth of 5.5 percent.