GCC to grow at double the rate of global economy despite slowdown in 2023

The GCC economy is expected to grow at more than twice the pace of the global economy next year despite the regional economy cooling down after two exceptionally strong years of growth, say economists.

According to Oxford Economics, the Gulf region will remain an investor hotspot in 2023 with demand for real estate remaining healthy.

“The GCC economies are ending 2022 on a high note, as they wrap up the strongest year in terms of GDP growth in more than a decade. We anticipate growth will shift into a lower gear in 2023, albeit remaining firmly positive, in contrast to many advanced and emerging markets,” said Maya Senussi, senior economist at Oxford Economics.

The think-tank estimates regional GDP to rise by over seven per cent this year and 2.9 per cent next year. This comes amidst many advanced and emerging economies slipping into mild recessions.

“GDP in the region will grow at more than twice the pace we forecast for the global economy… This (GCC growth) will, however, still be above the average pace in the five years preceding the pandemic,” she said.

Oil markets a key driver

Oxford Economics projected that the non-oil sector will again lead the rebound in the GCC region next year.

“We are particularly upbeat on Saudi Arabia, where the National Investment Strategy underpins the growth and investment outlook and indicators of consumer spending point to an ongoing strong recovery. Meanwhile, the UAE's policies in support of expansion in key sectors, embedded in the ‘we the UAE 2031’ vision, will drive growth,” said Senussi.

Another think-tank Capital Economics on Wednesday said lower oil output will weigh on economic growth in Kuwait, Oman and Bahrain over 2023 and fiscal policy will be less supportive to non-oil sectors compared with other Gulf states.

After registering strong growth this year, Capital Economics projected Saudi and UAE economies cooling down in 2023.

Senussi expects budget spending to provide crucial support to the GCC non-oil sectors next year. “Given the dependence of regional budgets on oil and gas revenues, their financial positions have improved considerably in 2022.”

GCC an investor hotspot

According to Oxford Economics, the regional equity market will benefit from the expected IPOs following a host of listings on the regional bourses, especially in the UAE and Saudi Arabia.

“More government assets will be put up for sale, while more companies will turn to stock markets to diversify funding for expansion. This will limit the downside to the performance of regional bourses and reinforce the push to deepen capital market growth. And there is scope for further real estate market growth, particularly in Dubai, where a resurgence in off-plan sales suggests a rise in construction activity in the pipeline,” it said.

— waheedabbas@khaleejtimes.com

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