The Gulf Cooperation Council’s (GCC) economic growth is set to reach 2.1 percent this year following the recent two-month extension of oil production cuts. However, growth will more than double to 4.4 percent next year as the cuts ease.
The latest ICAEW Economic Insight report for the Middle East also expects the GCC region’s non-oil growth to reach 4.2 percent next year with PMIs painting a positive picture of domestic activity and foreign orders.
“We have made only minor changes to our global outlook and expect the recent period of stable global growth to extend into 2025,” stated ICAEW.
The report expects global GDP growth at 2.7 percent both this year and the next. At a regional level, it expected the Middle East’s GDP to grow 2.1 percent this year and 3.7 percent in 2025.
Oil output cuts
OPEC+ recently extended oil output cuts until December, which signals a delay in the recovery of the GCC energy sectors. The region’s oil output will now shrink 2.9 percent this year.
For Saudi Arabia, ICAEW downgraded this year’s oil-GDP forecast from -5 percent to -5.4 percent. The downgrade follows a 9.1 percent annual plunge in 2023. However, the report expects activities to rebound strongly over the next two years. “We expect the GCC energy sectors to drive regional growth in 2025-26 as countries gradually increase production,” stated ICAEW.
GCC non-energy sector set for growth
Recent PMI readings reaffirmed the positive outlook for the GCC region’s non-energy sector growth, which looks on track for a 4.2 percent expansion this year and 4.4 percent in 2025. Domestic momentum remains strong across the region, with PMI data showing higher output.
In addition, the upcoming interest rate reductions should support both consumption and private investment. The latest estimates for Saudi GDP show real GDP contracted by 0.3 percent year-on-year in Q2, but non-oil activities rose by 4.9 percent.
In the UAE, travel and tourism continue to drive economic growth. A record-high number of passengers traveled through Dubai’s international airport in H1 2024. Meanwhile, Abu Dhabi and Dubai have recently been named top destinations for executive nomads, with many businesses establishing or growing their presence. The Abu Dhabi Global Market report continued to highlight strong growth in registrations of financial companies in H1 2024 which bodes well for continued high levels of FDI and population growth.
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Inflation to slow further
In its latest report, ICAEW lowered the 2024 inflation forecast for the GCC by 0.5 percentage points to 1.7 percent this year. However, it still expects it to rise to 2.1 percent next year. Recent readings show inflation is below 2 percent in all GCC countries except Kuwait and the UAE. In Saudi Arabia, inflation has hovered around 1.5 percent in recent months despite continued upward pressure from housing rents, which are seeing double-digit annual increases.
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