Oil costs have spiked practically 20 p.c since they hit this yr’s low of about $70 a barrel on March 20, largely pushed by the Group of Petroleum Exporting International locations (OPEC+) resolution to scale back oil output by about 1.16 million barrels per day and China’s reopening.
However additional positive factors will largely be subdued over the approaching months on slower world demand — not excellent news for the bloc which is closely depending on oil.
Saudi Arabia, the world’s largest oil producer, will develop 3.2 p.c this yr, lower than half 2022’s decade-high tempo of 8.7 p.c, in line with the April 6-25 Reuters ballot of 16 economists.
The expansion price was anticipated to be the identical subsequent yr.
“Oil output cuts will drive a pointy slowdown in GDP development in Saudi Arabia this yr…In the remainder of the Gulf, the double whammy of decrease oil manufacturing and oil costs will impression upon each oil and non-oil GDP,” mentioned James Swanston, rising markets economist at Capital Economics.
The United Arab Emirates (UAE), the second greatest economic system amongst GCC members, will develop 3.7 p.c in 2023 and 4.0 p.c subsequent yr, considerably decrease than 7.6 p.c final yr.
Each Qatar and Bahrain have been anticipated to develop at a slower tempo of two.7 p.c this yr. Whereas Oman was seen rising 2.6 p.c in 2023, Kuwait’s financial development was forecast at a a lot slower tempo of 1.5 p.c.
They aren’t the exception as development in most main economies was additionally anticipated to gradual this yr as twin threats of aggressive price hikes seep into financial exercise and persistently excessive inflation impacts client demand.
However the inflation outlook for the Gulf nations was extra muted in contrast to what’s anticipated in lots of main economies.
Inflation within the area was anticipated to be between 2.1 p.c and three.3 p.c this yr and fall decrease in 2024.
Most GCC economies have been nonetheless anticipated to get pleasure from double-digit present account surpluses in 2023 regardless of worries about slower oil manufacturing, with solely Oman and Bahrain predicted to publish surpluses in single digits.
International locations within the bloc have already proven intent to scale back their dependence on fossil fuels — their main supply of revenue
— because the world transitions in the direction of inexperienced vitality.
To bolster financial development by way of non-oil revenues, nations equivalent to Saudi Arabia, UAE, and Qatar have hosted main sporting occasions and exhibitions, and began constructing giant infrastructure tasks to draw vacationers.
“Tourism revenues will seemingly outpace GDP development in 2023,” mentioned Ralf Wiegert of S&P International Market Intelligence.
“Saudi Arabia will proceed to speculate massively into tasks related with Imaginative and prescient 2030, retaining the funds near
steadiness; ultimately, with oil costs not rising any longer, we see a modest (fiscal) deficit rising in 2024 and 2025.”