The Gulf Cooperation Council (GCC) is on an upward trajectory, with strong economic growth anticipated in the coming years. According to the latest Gulf Economic Update (GEU), the region is set to witness GDP growth rates of 3.2% in 2025 and 4.5% in 2026. This resurgence is largely attributed to the phasing out of OPEC+ oil production cuts, along with ongoing developments in non-hydrocarbon sectors.
In 2024, the region is expected to experience a significant improvement in economic performance, with a GDP growth of 1.7%, a substantial increase from just 0.3% in 2023. The non-oil economy has shown remarkable resilience, expanding by 3.7% due to factors such as increased private consumption, heightened investment, and persistent structural reforms sweeping across GCC nations.
However, the report cautions that external challenges could emerge, particularly in the form of global trade uncertainties and potential slowdowns in the world economy. To counteract these risks and secure future growth, the GEU encourages GCC member states to ramp up their diversification efforts and enhance regional trade integration.
A notable takeaway from the GEU report is the spotlight on Oman’s Medium-Term Fiscal Plan for 2020–2024. This initiative has been recognized as a leading example of effective fiscal reform in the region. To combat fiscal imbalances and reduce oversights in oil dependency, Oman has implemented far-reaching measures aimed at diversifying revenue streams, boosting spending efficiencies, and thoughtfully managing hydrocarbon revenues.
Despite promising growth forecasts, the GEU underscores the scrutiny applied to fiscal policies amid potential budgetary pressures projected across the GCC. With oil price fluctuations creating volatility, several member countries may find themselves facing fiscal deficits as early as 2025. The report emphasizes the need for a deeper understanding of fiscal effectiveness to foster resilient growth throughout the region.
Key findings from the report indicate that government spending has historically played a stabilizing role in GCC economies, particularly during downturns. It was noted that a 1-unit increase in fiscal spending could enhance non-oil output by 0.1 to 0.45 units. On the other hand, the impact of government investment on non-oil output appears more limited, yielding just 0.07% growth from a single percentage point increase in investment.
When delving into individual country performances within the GCC, Bahrain is set to see its growth rise to 3.5% in 2025, supported by infrastructure improvements and advancements in sectors like logistics, fintech, and tourism. Meanwhile, Kuwait’s economy is expected to rebound to 2.2% in 2025, facilitated by the removal of OPEC+ production cuts and key infrastructure projects.
Oman is projected to experience growth reaching 3% in 2025, climbing to 4% by 2027, driven by a recovery in oil output and robust performances across construction, manufacturing, and services. Qatar is forecasting stable growth of 2.4% in 2025, potentially ramping up to an impressive 6.5% in subsequent years, owing to planned liquefied natural gas (LNG) capacity expansions and enhanced infrastructure.
Saudi Arabia’s growth is similarly optimistic, projected to hit 2.8% in 2025, moving to an average of 4.6% in 2026 and 2027. The hydrocarbon sector is expected to see significant growth as OPEC+ cuts are lifted, while the non-oil GDP is anticipated to grow by 3.6% annually, aligning with the country’s Vision 2030 diversification goals.
In the UAE, growth is slated to reach 4.6% in 2025, stabilizing at 4.9% over the following years. The non-oil sectors remain the main drivers of growth, buoyed by strategic public investment and strengthened governance. The normalization of oil production is also anticipated to bolster the growth outlook.
In conclusion, the GCC is positioned for stronger growth in the upcoming years, underpinned by a resurgence in oil output and robust performances from non-oil sectors. However, achieving sustainability in this growth trajectory will require prudent fiscal policies, ongoing reforms, and resilience against global uncertainties. The GEU strongly advocates for innovative fiscal strategies—similar to Oman’s approach—as essential to ensuring long-term economic stability across the region.
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