DUBAI, 7 October – Amid stark signals of a looming worldwide recession, growth prospects of the GCC countries appear brighter than before with economists at the World Bank predicting a growth of 6.9 per cent in 2022 as oil prices surge.
Economists at the World Bank said in their latest Mena Economic Update that the Middle East and North Africa region’s economies also will grow by 5.5 per cent in 2022, the fastest rate since 2016, and by 3.5 per cent in 2023.
The report identified Saudi Arabia as the primary driver of GCC growth, with a forecast 8.3 per cent growth rate in 2022. Non-oil sectors in the GCC region are also expected to witness growth to varying extents in the coming year — from 2.6 per cent in Oman to 7.7 per cent in Kuwait.
Analysts at FocusEconomics are also upbeat about the Mena region, predicting the region’s GDP growth to accelerate in 2022, as oil exporters benefit from higher average oil quotas and prices. The region’s oil importers, however, will generally lose steam due to higher inflation.
“In 2023, regional growth should ease on cooling hydrocarbon prices and softer oil output growth. Risks include extreme weather, changes to Opec+ quotas, and sociopolitical instability,” Oliver Reynolds, Mena economist at FocusEconmics said.
“The GDP of the UAE will accelerate markedly this year, before softening in 2023. A booming oil sector — which is set to expand at a double-digit rate in 2022 after last year’s contraction—will spearhead growth, while the non-oil sector will add further impetus due to the government’s reform agenda. Regional tensions, volatile oil prices and the course of U.S. monetary policy remain key risks,” said Reynolds.
The GCC countries’ current account alone is projected to reach 17.2 per cent in 2022 and 14.6 per cent the following year, while their fiscal balance will touch 5.3 percent in 2022, up from a deficit of 2.2 percent the year before
The World Bank report said growth in the Mena region, however, will be uneven across country groups. Devastating shocks have pushed the global economy out of the low-inflation, low-interest-rate equilibrium that prevailed before 2020 into a new environment of higher inflation and rising interest rates,” said the report.
For a few countries, including oil exporters in Mena, the new global environment is one of opportunity — because elevated oil and gas prices are a major source of export earnings and fiscal revenues for the GCC countries and developing oil exporters.
For developing oil importers, however, the new global environment is one of heightened stress and risk. The combined direct and indirect effects of the crisis have led to higher import bills, especially for food and energy, as well as a depreciation of local currencies in some countries — both of which further fuel inflation, said the economists.
The current account of the Mena region is expected to advance notably in 2022 to reach 10.5 per cent of GDP compared to only 4.5 per cent the year before.
The region’s fiscal balance is said to reach 1.9 per cent of GDP, up from a deficit of 3.5 per cent in 2021, said the World Bank report. — Khaleej Times