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World Bank lowers GCC growth forecast to 3.2% in 2023

UAE employment Reuters/Satish Kumar
The UAE economy is forecast to grow at 3.3% in 2023, down from 4.1% projected in October

The World Bank has lowered the economic growth projection for the Gulf Cooperation Council (GCC) to 3.2 percent for 2023 and 3.1 percent in 2024 in its latest update.

It comes after GCC economies grew 7.3 percent in 2022.

The fastest-growing economy within the GCC is forecast to be Oman at 4.3 percent growth.

Saudi Arabia, the world’s top crude exporter, is predicted to grow 2.9 percent this year, registering the most significant slowdown among the GCC economies, from 8.7 percent in 2022 and the 3.7 percent projected in October.

The UAE economy, the GCC’s second biggest, is forecast to grow at 3.3 percent in 2023, down from the 4.1 percent foreseen in October.

Despite weakening oil demand, relatively high growth is expected to be sustained by increased hydrocarbon production capacity, particularly aided by the development of new natural gas fields, the World Bank said.

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

Iraq leads the group with growth forecasts for 2023 at 2.8 percent, down from 7.9 percent 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.

Growth in Algeria will decrease to 2.0 percent in 2023 from 3.1 percent a year earlier.

Iran’s GDP is expected to grow 2.0 percent 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 percent, the World Bank said.

For the GCC the current account balance will likely fall from 16.3 percent of GDP in 2022 to 12.1 percent in 2023 and 11.1 percent in 2024.

Fiscal balances are forecast to decrease, but remain in the surplus territory, with Qatar expected to post a fiscal surplus of 6.5 percent and the UAE 6.2 percent in 2023.

Despite the recent slowdown, both current accounts and fiscal balances are significantly higher than the pre-pandemic GCC average of 5.7 percent for current account and -3.2 percent for fiscal balances in 2019.

The GCC is expected to post a fiscal surplus of 3.2 percent of GDP in 2023, down from 4.3 percent in 2022, the report said.