The growth forecast for the Gulf Cooperation Council (GCC) has declined to 2.2 percent from 2.7 percent three months ago, with a slow recovery expected across the region in 2024 due to extended oil production curbs.
The latest economic update release from the Institute of Chartered Accountants in England and Wales (ICAEW) attributes the downgrade in the GCC region’s growth forecast to the impact of oil output cuts on economic growth despite its outlook for the non-oil sector remaining robust. The ICAEW also estimates that the GCC economy grew 0.6 percent last year.
OPEC+ production cuts
Despite OPEC+ production cuts and rising regional tensions, oil prices have struggled to remain above the $80 per barrel mark. In early June, OPEC+ announced that it would extend oil output cuts through the third quarter, before gradually phasing them out from October until the end of 2025. ICAEW expects Brent crude oil price to reach $82.1 in 2024 before declining below $80 again in 2025 and beyond.
GCC oil output will now shrink by 2.6 percent this year, following a decline of 5 percent in 2023. In Saudi Arabia, the institute expects oil activities to contract by 5 percent this year following a 9.1 percent annual decline in 2023. As voluntary production cuts are reversed, the energy sector is expected to contribute to Saudi Arabia and the GCC region’s growth in 2025.
Non-oil sector to maintain growth
The ICAEW also expects the non-oil sector across the GCC region to maintain growth. In Saudi Arabia, construction, manufacturing and transportation will likely garner the largest share of investments in light of multiple giga projects. Moreover, the sports and entertainment sector in the Kingdom is gaining traction along with the hospitality and tourism sector.
Tourism remains a strategic sector for growth in other countries across the GCC region as well and will remain a key growth driver. Tourism activity has recovered strongly since the pandemic, with visitor numbers hitting records across the GCC region in 2023 and the positive momentum continuing this year.
Inflation to decline
The ICAEW has also lowered its 2024 inflation forecast for the GCC region by 0.3 percentage points to 2.2 percent this year and 2.1 percent next year. Notably, inflation in Saudi Arabia remains close to global levels. Meanwhile, all GCC countries except the UAE and Kuwait have recorded inflation levels below 2 percent.
Read: Saudi Arabia sees sharp increase in FDI to $65 billion after pandemic: Report
Qatar and Bahrain to see growth
In 2024, Qatar’s GDP growth forecast stands at 2.2 percent. The institute also expects the country’s economy to expand by 2.9 percent in 2025 with stronger expansions in both the oil and non-oil sectors. However, growth will remain significantly weaker than in 2022, when the economy expanded by 4.2 percent due to the World Cup.
In Bahrain, the ICAEW expects growth of 3.1 percent in 2024, above the 10-year average, before declining to 1.4 percent in 2025.
Bahrain’s growth was very strong at 5 percent in 2022, in line with regional trends, before slowing to 2.4 percent in 2023 amid challenges in the oil sector and tighter monetary policy.
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