The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, predicts a slow recovery for the region in 2024 due to extended oil production curbs. The GCC growth forecast has been revised down to 2.2% from 2.7% three months ago, though non-energy sectors remain resilient, including in Bahrain and Qatar.

The OPEC+ group’s extension of voluntary output cuts through Q3 implies a delayed recovery in GCC energy sectors. GCC oil output will now shrink by 2.6% this year instead of the 1.3% expansion forecasted three months ago. Saudi Arabia, which is cutting production to the greatest extent, will see oil activities contract by 5% this year, down from a predicted growth of 0.7% three months ago. However, as voluntary production cuts are reversed in 2025, energy sectors will begin making positive contributions to GCC growth.

Qatar’s GDP growth projection for this year stands at 2.2% and is expected to rise to 2.9% in 2025. In contrast, Bahrain’s GDP growth is 3.1% this year, but is expected to slow to 1.4% in 2025. Since Qatar is not involved in the OPEC+ production quotas, its gas sector is a priority, with authorities doubling down on the North Field gas expansion project, promising a positive medium-term impact. Bahrain, on the other hand, continues to diversify its economy and reduce reliance on oil revenues. Last year its non-oil growth grew by 3.4%, accounting for nearly 84% of GDP.

High-frequency data paints a positive outlook for non-energy sectors across the GCC. In Saudi Arabia, investments are expected to flow into key sectors supporting giga-projects, including construction, manufacturing, and transportation. Strong momentum in the sports and entertainment sector will also be seen as the country’s transformation continues. The hospitality sector will likely follow, with tourism remaining key to Saudi’s growth agenda. Tourism is a strategic sector in other countries too, and will remain a key growth driver. Tourism activity has rebounded strongly, with record visitor numbers across the GCC in 2023, extending into this year.

Non-oil economies will continue to grow despite the GCC’s fiscal positions deteriorating. Saudi Arabia, Bahrain, and Kuwait will likely see budget deficits this year and next as the current oil price level is below the fiscal breakeven point. However, the overall GCC budget position will likely remain in surplus, bolstered by strong financial standings and favourable credit ratings, allowing continued access to funding from capital markets and IPOs.

Hanadi Khalife, Head of Middle East, ICAEW, said: “While geopolitical risks present headwinds for the GCC and wider Middle East, we are encouraged by the ongoing commitment to diversification and sustainability targets. Qatar, for example, became the first GCC sovereign to issue green bonds despite not having explicit net-zero targets. Bahrain is also aligning its non-oil economic growth with its Economic Vision 2030 and COP28 commitments to reduce carbon emissions by 30% by 2035.”

Scott Livermore, ICAEW Economic Advisor, and Chief Economist and Managing Director, Oxford Economics Middle East, said: “Although the region faces escalating pressures amid slowing global economies, the GCC remains relatively positive due to strong bilateral deals and investment. Qatar recently signed a 20-year supply contract with India for 7.5 million tonnes of liquefied natural gas annually, and a 27-year contract with Taiwan for 4 million tonnes. “Bahrain has also seen significant investment growth following the launch of the Golden License initiative in April 2023, which requires a minimum investment of US$50mn and the creation of at least 500 jobs. Bahrain’s financial services sector contributed nearly 18% of GDP, surpassing oil, which contributed 16%.”

The GCC inflation forecast for 2024 has been lowered by 0.3 percentage points to 2.2% this year, with a further slowdown to 2.1% expected next year. Excluding housing rents in some countries, notably Saudi Arabia, inflationary pressures remain contained, with rates below 2% in all GCC countries except Kuwait and the UAE.

Given the exchange rate pegs against the US dollar, GCC central banks tend to track the US Federal Reserve's policy rates. The US Federal Reserve is expected to begin gradually cutting policy rates in September, totalling a 150bps reduction by the end of 2025.

-Ends-

Media enquiries:
Tarik Raouf, Mojo PR, on email tarik@mojo-me.com
Notes to editors:

About ICAEW

Chartered accountants are talented, ethical and committed professionals. ICAEW represents more than 202,000 members and students around the world.

Founded in 1880, ICAEW has a long history of serving the public interest and we continue to work with governments, regulators and business leaders globally. And, as a world-leading improvement regulator, we supervise and monitor over 12,000 firms, holding them, and all ICAEW members and students, to the highest standards of professional competency and conduct.

We promote inclusivity, diversity and fairness and we give talented professionals the skills and values they need to build resilient businesses, economies and societies, while ensuring our planet's resources are managed sustainably.

ICAEW is the first major professional body to be carbon neutral, demonstrating our commitment to tackle climate change and supporting UN Sustainable Development Goal 13.

ICAEW is a founding member of Chartered Accountants Worldwide (CAW), a global family that connects over 1.8m chartered accountants and students in more than 190 countries. Together, we support, develop and promote the role of chartered accountants as trusted business leaders, difference makers and advisers.

We believe that chartered accountancy can be a force for positive change. By sharing our insight, expertise and understanding we can help to create sustainable economies and a better future for all.

About Oxford Economics

Oxford Economics is one of the world's foremost advisory firms, providing analysis on 200 countries, 100 industries and 3,000 cities. Their analytical tools provide an unparalleled ability to forecast economic trends and their economic, social and business impact. Headquartered in Oxford, England, with regional centres in London, New York, and Singapore and offices around the world, they employ one of the world's largest teams of macroeconomists and thought leadership specialists.