DUBAI – In its latest update released on Thursday, the World Bank lowered its 2023 economic growth projection for the six-member Gulf Cooperation Council (GCC) oil-exporting nations from 3.7% in October to 3.2%. This anticipated growth rate is less than half of the 7.3% increase collectively estimated for the GCC countries in 2022. The report was compiled before the unexpected oil output cuts announced on Sunday by the OPEC+ alliance, which have caused oil prices and price expectations to surge. The World Bank’s projections do not account for any potential impact of this decision.
A key factor behind the downward revision of growth forecasts is the anticipated decline in oil prices from their 2022 peaks. Saudi Arabia, the world’s leading crude exporter, is predicted to experience the most significant slowdown among GCC economies, with growth dropping from 8.7% in 2022 to 2.9% in 2023. This figure is down from the 3.7% projection made in October. Brent crude, the global benchmark oil price, reached $139 in March last year, nearing its all-time high. As of Thursday, it stands at approximately $84.
Despite these adjustments, GCC growth is expected to outperform the broader Middle East and North Africa (MENA) region, projected to expand by 3% in 2023, down from 5.8% in 2022. Roberta Gatti, the World Bank’s chief economist for the MENA region, told Reuters in an interview on Wednesday that “economic growth will slow down in 2023 on a narrative that the windfall from rising oil prices will come to an end.”
On Sunday, Saudi Arabia and other OPEC+ members announced surprise oil production cuts set to begin in May, sending global oil prices soaring. Gatti noted that while the Saudi economy remains significantly responsive to oil prices and the oil market, there is a deliberate and multifaceted effort towards diversification. All Gulf states have embarked on econtowardansformation plans to diversify their income sources away from hydrocarbons, achieving varying levels of success. The United Arab Emirates (UAE) is among the most diversified economies in the region, with Dubai recognized as a regional tourism and trade hub.
The World Bank forecasts that the UAE, the second-largest economy in the GCC, will grow at a rate of 3.3% in 2023, down from the 4.1% predicted in October. Oman is expected to be the fastest-growing economy within the GCC in 2023, with the World Bank projecting a growth rate of 4.3%. Last week, rating agency S&P upgraded Oman’s outlook from stable to positive, citing the government’s efforts to repair its balance sheet and reduce gross debt from around 60% of GDP in 2021 to 40% in 2022.
In 2023, the GCC is projected to post a fiscal surplus of 3.2% of GDP, a decline from the 4.3% surplus in 2022. This lowered growth projection highlights the importance of diversification efforts for GCC countries to maintain economic stability and reduce reliance on oil revenues. As the global energy landscape evolves, GCC nations must adapt and innovate to ensure sustained growth and development.