GCC economies are looking to grow at an aggregate rate of 2.2% in 2021, according to the latest issue of the World Bank Gulf Economic Update.
In the update titled COVID-19 Pandemic and the Road to Diversification, the World Bank noted that a global projected economic recovery, a rise in the demand for oil, and climbing oil prices all contribute to the growth forecast.
In 2020, GCC economies faced a GDP contraction of 4.8% due to the pandemic, the World Bank said. This is in line with global economic contractions. Oil supply cutbacks and falling prices resulted in a current account surplus of 2.9% of GDP.
Of all the GCC economies, Oman and Qatar are expected to show the most growth in the mid- term. Oman is expected to grow at 2.5% during 2021, before accelerating to 5.3% during 2022-23, buoyed by infrastructure investments.
Meanwhile, owing to a rebound in LNG demand, Qatar is expected to grow by 3% in 2021, 4.1% in 2022, and 4.5% in 2023. Fiscal support measures in Bahrain are expected to drive growth at 3.3% across the period.
Further, oil exports and demand will support a predicted growth this year of 2.4% in Kuwait and 2.4% in Saudi Arabia. Medium-term growth is pegged at 3.2% and 3% respectively.
In the UAE, government spending and Expo 2020 will push growth at 1.2% for the year, and 2.5 for 2022-23.
FISCAL DEFICITS ARE NARROWING IN GCC ECONOMIES
Although fiscal deficits are expected to continue into the year, the non-oil GDP in GCC economies has increased since a decade ago.
Further, Kuwait, Bahrain, and Oman – all three of which had the largest deficits of all GCC economies last year — are expected to remain in deficit for 2021-23. However, the fiscal deficit to GDP ratio will narrow down in 2023.
Oil and gas account for over 70% of exports in Kuwait, Qatar, Saudi Arabia and Oman. Meanwhile Kuwait, Qatar, Oman, and Bahrain derive 70% of government revenues from oil.
“The region needs to strengthen their competition policies to harness the benefits of telecommunications and the digitalisation of economic activity,” Issam Abousleiman, World Bank Regional Director of the GCC Countries, said.
Abousleiman added that GCC economies had “done a lot” to contain the pandemic, and would need to continue reforms in public sector finances. Telecoms investments in GCC economies were pivotal to digitising crucial industries amidst the pandemic, including public health, commerce, education, and banking and financial services, the report said.
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