This year has witnessed a relatively favorable economic landscape for GCC countries, characterized by robust non-oil growth despite prevailing uncertainties. Nevertheless, the broader Middle East has faced challenges, with the economic repercussions of the Gaza conflict extending to its neighboring nations, according to the latest Middle East Economy Watch report from PwC Middle East.
In June, OPEC+ managed to resolve internal discord and decided to extend its cooperation agreement at least until 2025, making further adjustments in September to reflect the evolving supply-demand dynamics in the oil market.
Moreover, indicators of non-oil sector growth appear strong this year. For instance, deal-making remains active, with 214 transactions recorded in the first half of 2024, driven by localization efforts, sovereign wealth fund investments, and ongoing transformations. Fiscal results have also been encouraging, as the UAE, Qatar, and Oman reported surpluses, while Saudi Arabia has reduced its deficit, as outlined in the report.
Despite persistent uncertainty in the region, exacerbated by ongoing conflicts, disruptions in the Red Sea, and decreased oil production, easing interest rates—particularly in countries with currencies linked to the U.S. dollar—should enhance credit access, thereby supporting growth in the non-oil economy.
Read more: Listed firms in GCC report $60.7 billion in net profits, 8.1 percent QoQ growth
Optimistic growth forecasts
IMF GDP forecasts project an acceleration in growth for the wider region, rising to 2.8 percent in 2024 (up from 2 percent in 2023) and reaching 4.2 percent in 2025. For GCC nations, non-hydrocarbon sectors are expected to be the main growth drivers as they continue to diversify their economies. The region is also poised to benefit from evolving trade patterns by lowering trade barriers, diversifying products and markets, and developing alternative trade routes, according to the report.
The report explores three significant themes:
OPEC+ adjustments and strong non-oil growth
The alliance has agreed to maintain production quotas through 2025, consistent with levels set in October 2022. OPEC+ plans can be swiftly modified in response to changes in the oil market, as seen in September when Brent crude prices fell from an average of 82 dollars to around 70 dollars, raising concerns about demand growth. Consequently, the planned tapering of voluntary cuts was postponed until December, with independent country assessments now delayed until late 2025, suggesting that some cuts may extend into 2026—marking a notable tenth consecutive year of producer action.
Egypt’s economic resurgence with UAE support
Financial backing from the UAE, along with support from the IMF, World Bank, and European Union, has facilitated a remarkable recovery in Egypt. The primary fiscal surplus has more than tripled to 18 billion dollars for the fiscal year ending in June, accompanied by falling inflation rates and record-high foreign exchange reserves. Despite ongoing challenges such as underemployment and geopolitical tensions, sectors like tourism are thriving in Egypt.
GCC’s pivotal role in the AI revolution
The region is strategically positioned to leverage the AI revolution, benefiting from substantial investment capital, top-tier ICT infrastructure, strong partnerships with major tech companies like Microsoft, Google, and Amazon, and a proactive approach to embracing new technologies. The rise of generative AI in recent years has significantly impacted the region. Looking forward, the GCC is expected to maintain its leadership in the global AI landscape, fueled by targeted investments and strategic initiatives. Sovereign wealth funds are anticipated to contribute significant capital towards developing AI infrastructure, including chip manufacturing and data centers, some of which may be based in the region.
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