Economic growth in the GCC region is expected to rebound to 2.8 per cent and 4.7 per cent in 2024 and 2025, respectively, led by robust GDP expansion in the UAE and Saudi Arabia, on the back of a projected oil production hike in the second half of 2024 and a recovery in global economic activity, according to the World Bank.
The brightening regional prospects and rebound are not just due to the anticipated recovery in oil output, as Opec+ gradually relaxes production quotas during the second half of 2024, but also builds on the strong momentum of the non-oil economy, which is expected to continue to expand at a robust pace over the medium term, World Bank said in its Spring 2024 Gulf Economic update.
“The commitment of the GCC to diversifying their economies highlights their strategic approach to fostering resilience and sustainable development during a volatile global economic period,” said the World Bank.
The Washington-based bank said despite diversification efforts, hydrocarbon receipts will remain crucial in shaping the region’s fiscal and external balances in the medium term.
The World Bank expects Saudi Arabia’s real GDP to grow by 2.5 per cent in 2024 and 5.9 per cent in 2025, driven primarily by robust non-oil private activities. It forecasts the UAE’s real GDP growth to accelerate to 3.9 per cent in 2024 and 4.1 per cent next year.
In the UAE, the oil output growth is projected to reach 5.8 per cent in 2024. Non-oil output will remain robust and continue to support economic growth in 2024, expanding at 3.2 per cent, driven by strong performance in the tourism, real estate, construction, transportation, and manufacturing sectors.
The World Bank report said that the UAE continued its strategic spending growth, supported development initiatives, and highlighted its commitment to sustainable, green, and digital growth.
The World Bank said the UAE maintained a strong current account surplus of 9.1 per cent of GDP, supported by rising non-oil exports in tourism and commercial services, enhanced new investments, and trade agreements with key Asian and African markets.
The report highlighted the continued strength of financial reserves in most GCC countries in 2023, noting that the UAE recorded significant growth throughout the year. It emphasised that the substantial improvement in the external balances of GCC countries over the past decade, primarily driven by the oil and gas sector and the expansion of non-oil exports, has kept financial reserves at comfortable levels.
The UAE is actively pursuing a series of structural measures and strategic investments to diversify its economy and enhance industrial capabilities. Key initiatives include Abu Dhabi’s $10 billion investment in tourism infrastructure, Adnoc Gas’s $13 billion gas expansion plan both globally and locally over the next five years, and the approval of a large public-private partnership portfolio worth $10.9 billion in Dubai, the report said.
The report confirmed that the UAE also experienced a recovery in employment to pre-pandemic levels. The Emiratisation strategy is being reinforced with a new budget of $1.74 billion aimed at integrating 36,000 citizens into the private sector by 2024.