Gulf countries see falling oil revenues cut economic growth
Rising crude oil prices, linked to production cuts by the OPEC+ countries, had an impact. In Saudi Arabia, growth should drop to 3.2 per cent in 2023, down from 8.7 per cent last year. The UAE’s growth should also decline from 7.6 per cent to 3.7 per cent. Inflation also weighs in.
Riyadh (AsiaNews) – The economies of the Gulf Cooperation Council (GCC) countries will grow at a much slower pace in 2023 than last year, with a substantial impact on revenues from oil sales and cuts in crude oil production.
According to experts polled by Reuters, oil prices spiked nearly 20 per cent since they hit this year's low of about US$ 70 a barrel on 20 March, largely driven by the Organization of Petroleum Exporting Countries’ (OPEC+) decision to reduce oil output by about 1.16 million barrels per day and China's reopening.
Any further gains will be largely contingent in the coming months on slower global demand, which is far from positive news for economies heavily dependent on oil revenues.
First of all, the economy of Saudi Arabia, the world's largest oil producer, is expected to grow by 3.2 per cent in 2023, less than half last year’s decade-high rate of 8.7 per cent.
The poll of 16 leading economists was carried out between 6 and 25 April. Looking to the immediate future, they expect the growth rate for 2024 to remain the same.
"Oil output cuts will drive a sharp slowdown in GDP growth in Saudi Arabia this year,” said James Swanston, emerging markets economist at Capital Economics. “In the rest of the Gulf, the double whammy of lower oil production and oil prices will impact upon both oil and non-oil GDP”.
The United Arab Emirates (UAE), the second-largest economy among the GGC countries, is set to grow 3.7 per cent in 2023 and 4 per cent next year, far lower than the 7.6 per cent in 2022.
Growth in both Qatar and Bahrain is equally expected to drop this year, to 2.7 per cent, followed by Oman at 2.6 per cent and Kuwait even lower, at 1.5 per cent.
The slowdown among GCC countries is not surprising, since most major economies are expected to slow this year due to rising rates and high inflation, which weigh on consumer demand.
However, the inflation outlook among Gulf countries was initially more subdued compared to what is expected in many major economies.
Inflation in the region is expected to be between 2.1 per cent and 3.3 per cent this year, before falling in 2024.
In the past, GCC countries already signalled their intent to reduce their dependence on fossil fuels – their main source of income – as the world adopts policies in favour of green energy.
To boost economic growth through non-oil revenues, countries like Saudi Arabia, the United Arab Emirates and Qatar have hosted major sporting events and exhibitions, multiplying large infrastructure projects to attract tourists.
"Tourism revenues will likely outpace GDP growth in 2023," said Ralf Wiegert of S&P Global Market Intelligence.
"Saudi Arabia will continue to invest massively into projects connected with Vision 2030, keeping the budget close to balance; eventually, with oil prices not rising any longer, we see a modest (fiscal) deficit emerging in 2024 and 2025.”