Doha: GCC economies are looking to grow at an aggregate rate of 2.2 percent 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 percent 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 percent of GDP.
Of all the GCC economies, Qatar and Oman are expected to show the most growth in the mid- term. Owing to a rebound in LNG demand, Qatar is expected to grow by 3 percent in 2021, 4.1 percent in 2022, and 4.5 percent in 2023.
Meanwhile, Oman is expected to grow at 2.5 percent during 2021, before accelerating to 5.3 percent during 2022-23, buoyed by infrastructure investments. Fiscal support measures in Bahrain are expected to drive growth at 3.3 percent across the period.
Further, oil exports and demand will support a predicted growth this year of 2.4 percent in Kuwait and 2.4 percent in Saudi Arabia. Medium-term growth is pegged at 3.2 percent and 3 percent respectively.
In the UAE, government spending and Expo 2020 will push growth at 1.2 percent for the year, and 2.5 percent for 2022-23. 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 percent of exports in Qatar, Kuwait, Saudi Arabia and Oman. Meanwhile Qatar, Kuwait, Oman, and Bahrain derive 70 percent 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.
