Gulf rebound set as Saudi Arabia seen topping 4% growth in 2022

A general view in Riyadh. In 2022, the Middle East’s largest economy and world’s largest oil exporter’s gross domestic product was seen growing 4.3%, an upward revision of 100 basis points (bps). Growth for 2023 was revised up 30 bps to 3.3%.

The six economies in the Gulf Co-operation Council (GCC) are set to rebound and grow 2% to nearly 3% this year while the region’s two largest economies, Saudi Arabia and the UAE, are forecast to grow over 4% next year, a quarterly Reuters survey showed. That outlook follows steep declines last year following an oil price crash and the impact of the Covid-19 pandemic, while analysts expected Saudi Arabia, the UAE and Kuwait to benefit from an Opec+ deal to boost oil production. “Our core assumption was that a longer-term deal would be secured, and we raise our 2022 forecasts on the back of the baseline adjustments, which will enable the UAE, Kuwait and Saudi Arabia to raise oil output and their global market share from May 2022,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. Medians in the July 5-26 poll pegged Saudi Arabia’s growth at 2.3% this year, down slightly from a forecast of 2.4% in a similar poll three months ago. In 2022, the Middle East’s largest economy and world’s largest oil exporter’s gross domestic product was seen growing 4.3%, an upward revision of 100 basis points (bps). Growth for 2023 was revised up 30 bps to 3.3%. The UAE was expected to grow 2.3% this year, unchanged, and 4.2% next year and 3.4% in 2023, revised up 60 bps and 10 bps respectively. Expectations for Kuwait’s 2021 GDP growth were lifted 60 bps to 2.4%, while growth next year was boosted 110 bps to 4.6%. Growth was seen 10 bps higher in 2023 at 3.0%. Oman was revised up 20 bps to 2.1% expected growth this year, up 10 bps to 3.3% next year and down 20 bps in 2023 to 2.2%. Bahrain’s outlook was unchanged for this year and next at 2.9%, while 2023 growth was seen 30 bps lower at 2.4%. At least half of the GCC’s state revenues come from hydrocarbons, and diversification away from that will “likely take many years to achieve,” with fiscal diversification likely to follow with additional lag, Moody’s said in a report last month. “The announced plans to boost hydrocarbon production capacity and government commitments to zero or very low taxes make it unlikely that this reliance will diminish significantly in the coming years, even with some progress in economic diversification, which we expect.”