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GCC economies to grow at much slower pace in 2023

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  • Five of six GCC states are predicted to have weak growth
  • Average growth of just 1.5% predicted
  • Only Bahrain’s growth prediction was upgraged

The economies of five countries in the six-member GCC are forecast to grow even more weakly than expected three months earlier because of lower prices of oil, the region’s main export, according to a Reuters poll of economists.

Brent crude, the global benchmark of oil price, has fallen from a near record-high of $139 a barrel last March to around $79.

This is despite the Organization of the Petroleum Exporting Countries, and allies led by Russia (Opec+), cutting oil output in November by 3.66 million barrels per day (bpd) over poor demand.

The economy of Saudi Arabia, the world’s second-largest oil producer, was expected to expand 1.1 percent this year, according to a July 10-18 Reuters poll of 17 economists. That is less than half of 3.2 percent growth rate predicted in an April poll. It grew 8.7 percent in 2022.

“On the back of the extension to the voluntary oil output cut, we have nudged down our GDP growth forecast for 2023 and expect the Saudi economy to stagnate,” noted James Swanston, emerging markets economist at Capital Economics.

“The latest round of agreed Opec+ oil output cuts will drive a sharp economic slowdown in the Gulf states. Despite the cuts to production, oil prices haven’t rallied as some members might have hoped.”

Among other Gulf countries, median growth forecasts in the UAE, Kuwait and Oman were substantially downgraded to 2.8 percent, 0.5 percent and 1.8 percent, respectively, while that of Qatar was marginally lowered to 2.6 percent.

Only Bahrain’s growth rate was upgraded, to 3 percent, up from 2.7 percent in the previous poll.

Low oil demand

Average growth across the six GCC economies is forecast to be 1.5 percent this year, slightly more than half the 2.8 percent forecast in April.

Much of the decline was a result of weak demand for oil from China, the world’s second-largest economy, which was expected to grow a modest 5.5 percent this year, a separate Reuters poll showed.

“The outlook… is subject to a myriad of risks, not the least of which will be China’s demand picture actually collapsing or Saudi Arabia choosing to quickly unwind its voluntary one million bpd of cuts meant for July,” said Edward Bell, senior director, market economics at Emirates NBD.

“Market sentiment on China appears to skew heavily negative with concern that strain in the country’s property market will be a persistent and potentially heavy drag on economic activity.”