- Non-oil growth outturn so far for 2024 is encouraging with 4% in UAE, 3.7% in KSA, 3.8% in Oman and Kuwait returning to growth at 4.7%
- Outlook for further non-oil growth remains positive for 2025 as US interest rates fall enabling GCC states to also lower rates
- OPEC+ agrees to extend cooperation and push back planned tapering amid softer demand forecasts as oil falls towards the $70 mark increasing fiscal uncertainty
- Funding support from the UAE and third parties including IMF, World Bank and the European Union, has enabled a strong recovery in Egypt.
- GCC well positioned to capitalise on the AI revolution amid local innovation and international investment
Dubai, United Arab Emirates – 17 September 2024 – PwC Middle East released today its latest Middle East Economy Watch, which highlights that the GCC economies are displaying strong non-oil growth amid looming uncertainties.
2024 has seen relatively positive economic developments for countries in the GCC. However, the year has still been challenging for the broader region, with the economic impact of the war in Gaza extending to neighbouring countries.
In June, OPEC+ overcame internal tensions and agreed to extend its cooperation agreement at least through 2025 and a further adjustment was made in September, reflecting renewed supply-demand dynamics in the oil market. Additionally, non-oil sector growth indicators look solid this year. Deal making, for example, continues with 214 deals in H1 2024 as localisation, sovereign wealth fund investment and transformation continues apace. Fiscal outturns have also been positive, with the UAE, Qatar and Oman achieving surpluses and Saudi Arabia narrowing its deficit.
Uncertainty looms over the region, fuelled by ongoing conflicts, disruptions in the Red Sea, and reduced oil production. However, as interest rates ease, especially in countries with currencies pegged to the US dollar, access to credit should improve, fostering growth in the non-oil economy. GDP forecasts from the IMF indicate an accelerating growth rate for the wider region to 2.8% in 2024 (up from 2% in 2023) and 4.2% in 2025. For the GCC members, non-hydrocarbon sectors are poised to be primary drivers of growth as these countries continue to diversify their economies. The region also stands to benefit from shifting trade patterns by reducing trade barriers, diversifying products and markets and developing alternative trade corridors.
Richard Boxshall, Partner and Chief Economist, PwC Middle East, commented: “While OPEC+ decisions and oil price fluctuations remain important factors, the region’s strong non-oil sector growth provides a buffer against global volatility. Looking ahead, continued diversification and a focus on innovation will be key to achieving sustainable growth.”
The report delves into three key themes:
- OPEC+ tries to taper and non-oil growth remains robust: The alliance agreed to extend their production quotas through 2025, maintaining the levels set in October 2022. As always, OPEC+ plans can be quickly modified if oil market conditions materially change. This happened in September when, having averaged US$82 in the year until August, Brent crude dipped toward US$70, amidst concern about demand growth. In response, the plan to taper voluntary cuts was postponed for two months and will now start in December rather than October. Independent country assessments have been delayed until late 2025. This, in turn, is a signal that some OPEC+ cuts could continue into 2026, which would mark a remarkable tenth consecutive year of producer action.
- Egypt has experienced a remarkable economic turnaround with UAE support: Funding support from the UAE and third parties including IMF, World Bank and the European Union, has enabled a strong recovery in Egypt. Primary fiscal surplus has more than tripled to $18 billion for the fiscal year ending in June, with declining inflation rates and foreign exchange reserves increasing to record high levels. Despite persistent challenges in the form of underemployment and geopolitical tensions, sectors such as tourism continue to boom in Egypt.
- The GCC is playing a leading role in the AI revolution: The region is well-positioned to capitalise on the AI revolution, thanks to several key advantages, such as abundant investment capital, world-class ICT infrastructure, strong relationships with major tech firms, such as Microsoft, Google and Amazon, and most importantly, a keenness to embrace new technologies. The emergence of GenAI in recent years has been particularly transformative for the region. Looking ahead, the GCC will continue to play a leading role in the global AI landscape, driven by concerted investments and strategic initiatives. Sovereign wealth funds are also likely to contribute substantial capital to invest in building AI infrastructure, including chip manufacturing and data centres, some of which could be hosted in the region.
Stephen Anderson, Partner, Middle East Strategy Leader, PwC Middle East, said: “Amid global uncertainty the region stands out as we continue to transform driving digitisation, decarbonisation, privatisation, localisation and modernisation. It is emerging as a genuine global player in AI fueled by investment, a focus on driving local innovation in large language models, collaboration with global technology organisations and the abundant supply of energy, particularly renewable energy to meet the demands of AI.”
PwC’s newly released Middle East Economy Watch can be read here.
-ENDS-
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 151 countries with nearly 364,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
Established in the Middle East for 40 years, PwC Middle East has 30 offices across 12 countries in the region with around 11,000 people. (www.pwc.com/me)
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
© 2024 PwC. All rights reserved