Gulf economies seen rebounding this year but some forecasts scaled back

Dubai: The economies of the six-member Gulf Cooperation Council are expected to return to growth this year, a quarterly Reuters survey showed on Thursday, but half are seen expanding less than previously forecast.

Economists in the April 8-20 poll forecast a marked improvement in economic fortunes across the oil-rich region after it was hammered by the COVID-19 pandemic.

But while median forecasts for 2021 growth were raised for Bahrain and to a lesser extent the UAE, they were scaled back for Saudi Arabia, Kuwait and Oman while the outlook for Qatar was unchanged.

The economists expect Saudi Arabia’s economy, the Middle East’s largest, to grow 2.4 per cent this year, less than the 2.8 per cent forecast in a similar poll three months ago. Economic growth in 2022 and 2023 was seen at 3.3 per cent and 3 per cent respectively, versus 3.2 per cent and 3.1 per cent in the previous poll.

The kingdom is in the midst of an ambitious economic development plan dubbed Vision 2030 to wean the economy off oil, create jobs and boost investment.

“While some progress has been made in implementing the needed reforms, bureaucracy, lack of transparency, and inefficiency remain major impediments to achieving sustained rapid private sector growth,” the Institute of International Finance (IIF) said in a report.

The UAE’s economy was seen growing by 2.3 per cent this year, up slightly from the 2.2 per cent expected three months ago. Growth was forecast at 3.6 per cent in 2022 and 3.3 per cent in 2023, up from 3.5 per cent and 3 per cent projected in January.

“The UAE can afford a modestly expansionary fiscal stance in 2021 given its spare capacity and the recovery in oil prices,” the IIF said.

“Higher oil prices combined with the economic recovery will support the banking sector by improving the liquidity situation and demand for private sector credit.”

The forecast for Qatar’s 2021 economic growth was unchanged from the previous poll at 2.8 per cent, but edged up to 3.6 per cent for next year from 3.5 per cent. The 3.1 per cent growth forecast for 2023 was up a full percentage point from the previous survey with a boost expected from its hosting of the FIFA World Cup in late 2022.

The economists revised down their expectations for Kuwait this year to 1.8 per cent growth from 2.2 per cent previously as it faces a possible liquidity crunch. However, the 3.5 per cent growth seen next year is comfortably above the January forecast of 2.7 per cent, with 2023 expectations at 2.9 per cent versus 3 per cent.

Oman’s economy was expected to grow at 1.9 per cent this year, 3.2 per cent next year and 2.4 per cent in 2023, compared to 2.1 per cent, 2.7 per cent and 2.5 per cent in the previous poll.

Bahrain’s economy was seen growing the most this year, at 2.9 per cent compared with 2.5 per cent in the last poll, with the pace expected to be maintained next year, in line with the previous forecast.

Economic growth in 2023 was forecast at 2.7 per cent, up from 2 per cent previously.