By Elias Al Helou

Home Economy World Bank: GCC growth projected at 1.6 percent in 2024, 4.2 percent in 2025-2026

World Bank: GCC growth projected at 1.6 percent in 2024, 4.2 percent in 2025-2026

UAE's economic growth is projected at 3.3 percent in 2024, driven by 4.1 percent non-oil sector growth

The World Bank forecasts real GDP in Saudi Arabia to grow by 1.1 percent in 2024, primarily driven by robust non-oil activity growth of 4.6 percent.

Published: Mon 2 Dec 2024, 4:22 PM

The Gulf Cooperation Council (GCC) region is projected to experience modest economic growth of 1.6 percent in 2024, with an anticipated increase to 4.2 percent during 2025-2026, as detailed in the Fall edition of the Gulf Economic Update released by the World Bank Group. This growth trajectory is largely fueled by the non-oil sector, which is on a solid path with a growth rate of 3.7 percent, primarily due to ongoing diversification initiatives and ambitious reforms across the region.

In 2024, inflation is expected to remain low and stable at 2.1 percent, bolstered by subsidies, fuel price controls, and fixed currency rates. Nonetheless, inflationary pressures in the housing market persist in several nations. The fiscal landscape is experiencing stress from escalating government expenditures and declining oil revenues, with significant disparities observed throughout the region.

Safaa El Tayeb El-Kogali, World Bank’s GCC country director, noted that the region has demonstrated impressive resilience amidst global disruptions and is steadily advancing its diversification agenda. She emphasized that maintaining prudent economic policies will be crucial for securing sustainable growth in the future.

GCC nations are grappling with severe water scarcity, with renewable freshwater availability often falling below 100 cubic meters per capita per year. This situation compels a heavy dependence on non-renewable groundwater and energy-intensive desalination processes.

Recommendations for sustainable practices

The report’s Special Focus, titled “Navigating the Water Challenge in the GCC: Paths to Sustainable Solutions,” emphasizes strategies to address these challenges. Key recommendations include enhancing water efficiency through pricing reforms. Expanding the reuse of wastewater is also important. Employing renewable energy for desalination can further improve the situation. Additionally, it is essential to bolster governance, regional collaboration, and regulatory frameworks. These strategies aim to tackle water-related challenges, alleviate fiscal pressures, and unlock economic potential. The World Bank is committed to supporting these initiatives, providing insights for sustainable water management that will benefit future generations.

GCC countries outlook

United Arab Emirates (UAE)

UAE’s economic growth is forecasted at 3.3 percent in 2024, propelled by a sustained increase of 4.1 percent in the non-oil sector, the World Bank emphasized. This expansion is supported by strong performance across various sectors, particularly tourism, real estate, construction, transportation, and manufacturing. In the medium term, overall GDP growth is projected to rise to 4.1 percent in 2025 and 2026, aided by a recovery in oil production.

Saudi Arabia

According to the World Bank, real GDP in Saudi Arabia experienced a contraction of 0.8 percent in 2023. It is anticipated to grow by 1.1 percent in 2024. This growth is primarily driven by robust non-oil activity, which is expected to grow by 4.6 percent. This growth will partially mitigate the expected 6.1 percent contraction in oil GDP, attributed to extended voluntary oil production cuts until the end of November 2024. Growth is projected to accelerate to an average of 4.7 percent in 2025-2026, driven by increased oil production. The non-oil sector, crucial to Saudi Arabia’s economic diversification strategy, is expected to remain steady at around 4.5 percent during 2025-2026.

Qatar

The economy in Qatar is projected to experience slight growth, averaging 2.4 percent in 2024-2025, and reaching 4.1 percent in 2025-2026, driven mainly by increased gas production capacity. The report noted that the non-oil GDP sector is expected to remain robust at 2.3 percent in 2024. This growth is bolstered by new infrastructure initiatives, a growing manufacturing sector, and a rapidly expanding tourism industry. This positive momentum is anticipated to strengthen further, with growth expected to hit 3.4 percent in 2025-2026. The hydrocarbon sector is forecasted to hold steady at 1.5 percent in 2024 due to capacity constraints. However, substantial growth is expected between Q4 2025 and 2027 following the North Field expansion.

Bahrain

Economic growth is expected to rise to 3.5 percent in 2024, up from 3.0 percent the previous year, according to the World Bank. This enhancement is fueled by a diverse range of non-oil activities. The oil sector is anticipated to see a partial recovery in 2024. Moreover, this recovery is thanks to increased production in the Abu Safah oilfield. Growth is projected to stabilize at 3.3 percent during 2025-2026 in alignment with rising oil sector output.

Kuwait

The paper noted that the economy in Kuwait is forecasted to contract by 1 percent in 2024. This decline is smaller than in 2023. It is largely due to the repeated extensions of voluntary OPEC+ output cuts. However, it is expected to rebound in 2025-2026. The growth is projected to reach 2.6 percent. This recovery will be supported by an increase in oil output and a ramp-up in infrastructure projects.

Oman

Furthermore, the report showed that the GDP growth in Oman is likely to slow in 2024, primarily due to the ongoing extensions of voluntary OPEC+ output cuts. Nonetheless, growth is projected to recover to an average of 3.0 percent during 2025-2026. This recovery is underpinned by rising oil production. Ongoing reforms and investments in non-oil sectors will pave the way for enhanced non-oil growth.