Economic growth in GCC to more than halve in 2023

The World Bank has revised its 2023 economic growth projection for the oil exporters of the six-member Gulf Cooperation Council (GCC) downwards to 3.2 per cent in its latest update released on Thursday, from 3.7 per cent forecast in October.

Such a rate would be less than half the 7.3 per cent increase estimated across the six member countries last year.

The report was compiled before surprise oil output cuts announced on Sunday by OPEC+, which have driven up oil prices and price expectations, and the World Bank said its projections do not incorporate any impact from that decision.

An expected decline in oil prices from highs in 2022 is behind the downward revision to growth forecasts, with Saudi Arabia, the world’s top crude exporter, forecast to grow by 2.9 per cent in 2023, the sharpest slowdown among the GCC economies, from 8.7 per cent in 2022, and 3.7 per cent projected in October.

Brent crude, the global benchmark oil price, hit a high of $139 in March last year, close to its all-time high. On Thursday it stood around $84.

GCC growth will still outperform the wider Middle East and North Africa region, forecast to grow by 3 per cent in 2023, down from 5.8 per cent growth in 2022, the World Bank said in its outlook.

“Economic growth will slow down in 2023 on a narrative that the windfall from rising oil prices will come to an end,” Roberta Gatti, the World Bank’s chief economist for the MENA region told Reuters in an interview on Wednesday.

On Sunday, Saudi Arabia announced surprise oil production cuts starting in May, along with other members of the OPEC+ alliance, which sent global oil prices soaring.

“The Saudi economy is still quite reactive to oil prices and the oil market; at the same time there is a very purposeful intent of diversification which is very multi-pronged,” Gatti said.

All the Gulf states have embarked on economic transformation plans to diversify income sources away from hydrocarbons, with varying degrees of success. The United Arab Emirates is among the most diversified economies in the region, with Dubai seen as a regional tourism and trade hub.

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

The fastest growing economy within the GCC in 2023 is projected to be Oman, the World Bank said, with growth seen at 4.3 per cent.

Rating agency S&P last week revised Oman’s outlook to positive, from stable. It said the government was repairing its balance sheet and had reduced gross debt to 40 per cent of GDP in 2022, from around 60 per cent in 2021.

The GCC is expected to post a fiscal surplus of 3.2 per cent of GDP in 2023, down from 4.3 per cent in 2022.