GCC’s non-energy sectors to drive GDP expansion in 2024

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Doha, Qatar: The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, reveals the region is expected to defy the global slowdown in 2024 as non-energy sectors continue to drive growth. The pace of the Middle East’s GDP growth is predicted to rise to 3.2% next year, above the global GDP growth forecast of 2.1%.

According to the Q4 report, the Middle East economy will expand less than initially expected this year, with GDP growth expected at 1.3%. However, growth will improve in 2024 and outpace most advanced and emerging economies. Projections for GCC growth this year have been scaled back to 0.7% due to a large negative contribution from the energy sector amid ongoing curbs in oil production. However, there are promising signs within the non-energy sectors, notably in Saudi Arabia and the UAE. The GCC’s growth is expected to rise to 3.9% next year, primarily propelled by these industries.

The region’s non-energy sector continued to deliver growth this year, especially in Saudi Arabia and the UAE. The resurgence of travel and tourism across the region has been notably robust, surpassing pre-pandemic levels in nearly every GCC country. Saudi Arabia’s tourism industry continues to thrive, welcoming 27.6 million overnight tourists this year. This is expected to increase further, with a projected 30 million tourists by 2024 and more than 50 million by 2032., The government recently revised its 2030 visitor target to 150 million (both domestic and international), up from the previous 100 million, aiming for the tourism sector to contribute 6% of GDP in the current year and 10% by 2030. The introduction of a unified GCC tourist visa, expected to take effect in 2024 or 2025, will likely further amplify visitor arrivals to the region.

Energy prices have cooled over the past month, despite the ongoing Israel-Gaza conflict. Measures to bolster prices, including additional voluntary cuts during the OPEC+ November meeting and Saudi Arabia’s pledge to extend its 1m b/d reduction through Q1 2024, have had limited impact.

While the Brent crude price is currently trading below $80pb, down from over $90pb in early October and below the report’s average forecast of $83pb for this year, the tight global supply outlook is expected to support prices next year, with Brent forecast to average $84.4pb in
2024.

Hanadi Khalife, Head of Middle East, ICAEW, said: “The economic outlook this quarter has been significantly hampered by oil output cuts. We now expect GCC oil output to shrink by nearly 5% this year, which makes it the weakest performance since 2009, excluding 2020. However, despite oil production and prices, there remains positive momentum in the non-energy sectors and an overall investment drive across the region to support this growth.”

Scott Livermore, ICAEW Economic Advisor, and Chief Economist and Managing Director, Oxford Economics Middle East, said: “The global economic backdrop is weakening as we enter 2024, with most major economies poised for a significant slowdown. However, there are indicators of optimism for the region. We have seen better than expected recovery in the travel and tourism sector which will continue to drive GDP expansion next year, outpacing global growth forecasts.”