Oil price decline to weigh on GCC economies: World Bank

The UAE economy, the Arab World’s second biggest, is forecast to grow at 3.3 per cent in 2023, the World Bank said as it lowered its 2023 economic growth projection for the GCC countries to 3.2 per cent from 3.7 per cent forecast made in October last year due to an expected decline of oil prices from the highs reached in 2022.

While the fastest-growing economy within the GCC is forecast to be Oman at 4.3 per cent growth, Saudi Arabia, the world’s top crude exporter, is predicted to grow 2.9 per cent this year, registering the most significant slowdown among the GCC economies, from 8.7 per cent in 2022 and the 3.7 per cent projected in October, the World Bank said in its latest update.

As per the Washington-based bank’s forecast, Qatar’s economy is forecast to grow at 3.3 per cent, Kuwait’s at 2.7 per cent, and Bahrain’s at 3.1 per cent in 2023.

The combined GCC economy is valued at $2 trillion. If GCC countries continue business as usual, what they have done for the last three or four decades, and growing approximately at an average of 4.0 per cent, the combined economy of the GCC will be $6 trillion by 2050. If they go into a green growth strategy that will improve their productivity, then they will go above $13 trillion, a World Bank official has said.

In 2024, the current account balance of the GCC will likely fall from 16.3 per cent of GDP in 2022 to 12.1 per cent in 2023 and 11.1 per cent in 2024.

The report said fiscal balances are forecast to decrease, but remain in the surplus territory, with Qatar expected to post a fiscal surplus of 6.5 per cent and the UAE 6.2 per cent in 2023. The GCC is expected to post a fiscal surplus of 3.2 per cent of GDP in 2023, down from 4.3 per cent in 2022, the report said.

The bank’s economists forecast that the Mena region will grow by 3.0 per cent in 2023 and by 3.1 per cent in 2024, much lower than the growth rate of 5.8 per cent in 2022. The Mena average growth rate masks the stark differences across countries, the World Bank noted.

Developing oil exporters in the Middle East are forecast to experience trends similar to those of the GCC but at lower levels, with 2023 growth expected to drop to 2.2 per cent after growing at 3.9 per cent in 2022, it added.

Iraq leads the group with growth forecasts for 2023 at 2.8 per cent, down from 7.9 per cent in 2022, partly sustained by growth in non-oil GDP (projected at 4.5 percent), which is assisted by a planned budgetary expansion in 2023. Iran’s GDP is expected to grow 2.0 per cent in 2023, representing a deceleration from 2.7 percent growth in 2022, constrained by water and electricity shortages and political instability.

In 2024 the average growth for developing oil exporters is likely to pick up slightly to 2.4 per cent, the World Bank said.

The report said the GCC economies managed to keep their inflation well below global averages. The GCC countries maintained a stable peg between their currencies and the dollar, a fixed exchange rate along with fuel subsidies and other interventions which helped contain inflation, according to the bank.

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