عربي English Türkçe اردو فارسى
Logo
Latest News
Business

World Bank Forecasts 3.6% Growth in GCC in 2024

The World Bank launched a report on the economic updates in the GCC countries. (Asharq Al-Awsat)
The World Bank launched a report on the economic updates in the GCC countries. (Asharq Al-Awsat)
TT
TT

World Bank Forecasts 3.6% Growth in GCC in 2024

The World Bank launched a report on the economic updates in the GCC countries. (Asharq Al-Awsat)
The World Bank launched a report on the economic updates in the GCC countries. (Asharq Al-Awsat)

The Gulf Cooperation Council (GCC) region is estimated to grow by 1% in 2023 before picking up again to 3.6 and 3.7 % in 2024 and 2025, respectively, according to the recently published World Bank Gulf Economic Update (GEU) report.

“The diversification efforts in the GCC region are paying off but more reforms are still needed,” said the report.

In Saudi Arabia, “the oil sector is expected to contract by 8.4 % during 2023 to reflect oil production curbs agreed within the OPEC+ alliance. Meanwhile, non-oil sectors are expected to cushion the contraction, growing at 4.3% supported by looser fiscal policy, robust private consumption, and public investment drive. As a result, overall GDP will show a contraction of 0.5% in 2023 before reporting a recovery of 4.1% in 2024 to reflect expansions of oil and non-oil sectors.”

The latest issue of the GEU report, titled “Structural Reforms and Shifting Social Norms to Increase Women’s Labor Force Participation” states that “the weaker performance this year is driven primarily by lower oil sector activities, which is expected to contract by 3.9%, to reflect OPEC+ successive production cuts and the global economic slowdown.”

“However, the reduction in oil sector activities will be compensated for by the non-oil sectors, which are expected to grow by 3.9 % in 2023 and 3.4 % in the medium term supported by sustained private consumption, strategic fixed investments, and accommodative fiscal policy”.

“To maintain this positive trajectory, GCC countries must continue to exercise prudent macroeconomic management, stay committed to structural reforms, and focus on increasing non-oil exports,” said Safaa El Tayeb El-Kogali, World Bank Country Director for the GCC.

“However, it is important to acknowledge the downside risks that persist. The current conflict in the Middle East poses significant risks to the region and the GCC outlook, especially if it extends or involves other regional players. As a result, global oil markets are already witnessing higher volatility,” El-Kogali added.

“The region has shown notable improvements in the performance of the non-oil sectors despite the downturn in oil production during most of 2023,” said Khaled Alhmoud, Senior Economist at the World Bank. “Diversification and the development of nonoil sectors has a positive impact on the creation of employment opportunities across sectors and geographic regions within the GCC.”

“The Special Focus section of the report takes a deep dive into the remarkable rise of female labor force participation (FLFP) in Saudi Arabia. Since 2017, the Kingdom has witnessed a significant increase in FLFP across all age groups and education levels. Importantly, this surge in participation did not lead to unemployment—to the contrary, unemployment rates have decreased as Saudi women have embraced job opportunities in almost every sector of the economy. This positive development was a result of an effective reform drive, started by the Kingdom’s Vision 2030, that made it significantly easier for more women to join the workforce, and shifts in social norms that were facilitated by the government’s commitment and effective communications.”

According to the GEU report, “the Saudi private sector workforce has grown steadily, reaching 2.6 million in early 2023. Additionally, the labor force participation of Saudi women more than doubled in a span of six years, from 17.4% in early 2017 to 36 % in the first quarter of 2023.”

“GCC countries have witnessed a remarkable increase in female labor force participation,” said Johannes Koettl, Senior Economist at the World Bank. “Saudi Arabia’s achievements in advancing women’s economic empowerment in just a few years is impressive and offers lessons for the MENA region and the world.”

In Qatar, “real GDP growth is estimated to slow down to 2.8 % in 2023 and continue at this rate in the medium term. Despite the weakening of the construction sector and tighter monetary policy, robust growth is anticipated in the non-hydrocarbon sectors, reaching 3.6% propelled by thriving tourist arrivals and large events. Qatar’s standing as a global sporting hub will be further reinforced by an additional 14 major sporting events during 2023. Meanwhile, the hydrocarbon sector is estimated to grow by 1.3% in 2023.”

In UAE, “economic activity is anticipated to slowdown in 2023 to 3.4% due to weaker global activity, stagnant oil output, and tighter financial conditions. Following tighter OPEC+ production quotas, oil GDP growth is projected at 0.7% in 2023 but expected to recover strongly in 2024 as production quotas are relaxed. On the other hand, non-oil output is forecast to support economic activity in 2023, growing at 4.5% with the strong performance in tourism, real estate, construction, transportation, manufacturing, and a surge in capital expenditure.”

In Bahrain, “growth is estimated to moderate to 2.8% in 2023 capped by a soft performance of the oil sector while the non-oil sector remains the key driver for growth. The hydrocarbon sector is expected to register small growth of 0.1% during 2023-24 while the non-hydrocarbon sectors will continue expanding at nearly 4% supported by the recovery in the tourism, service sectors, and the continuation of infrastructure projects.”

In Kuwait, “economic growth is projected to decelerate sharply to 0.8% in 2023 due to a decrease in oil output, monetary tightening, and sluggish global economic activity. Following tighter OPEC+ production quotas and reduced global demand, oil GDP growth is expected to contract by 3.8% in 2023 but is anticipated to recover in 2024 as production quotas are relaxed—supported by higher activity from the AlZour refinery. The non-oil sector is projected to grow by 5.2% supported by private consumption and loose fiscal policy.”

As for Oman’s economy it “is estimated to slowdown in 2023 capped by OPEC+ production cuts and slower global economic activity. However, the economy is anticipated to strengthen over the medium-term driven by higher energy production and wide-ranging structural reforms. Overall growth is projected to decelerate to 1.4% in 2023, as oil output falls, while nonoil sectors are expected to support growth, rising by over 2%, driven by the rebound in construction, investments in renewable energy, and tourism sectors.”

Most Viewed

 
 
Business

Fitch Affirms Saudi Arabia at 'A+', Outlook Stable

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)
TT
TT

Fitch Affirms Saudi Arabia at 'A+', Outlook Stable

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)

Fitch Ratings has affirmed Saudi Arabia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at "A+" with a Stable Outlook, the agency said on Friday.

The rating reflects strong fiscal and external balance sheets, with government debt/GDP and sovereign net foreign assets (SNFA) considerably stronger than the "A" and "AA'" medians, and significant fiscal buffers in the form of deposits and other public sector assets, it added.

"Oil dependence and World Bank Governance Indicators (WBGI) have improved but remain weaknesses. Geopolitical risk is high, but the economy and public finances have been resilient to the US-Iran war," it stressed.

"Fitch forecasts real GDP growth will slow to 0.6% in 2026 due to disruption to trade caused by the closure of the Strait of Hormuz," it continued.

"Flows through the East-West pipeline supported oil production during the war and we expect output to be ramped up to meet external demand following the reopening of the Strait and to rebuild domestic stocks, but at an annual average of 9m b/d it will be below the 2025 level," it said.

"Non-oil growth will be hit by an inability to export petrochemicals during the closure of the Strait, but consumer spending held up and business confidence is recovering."

"Growth will rebound in 2027 as the normalization of flows through the Strait allows higher oil and petrochemicals production, before easing to 2.9% in 2028 The phased opening of gigaprojects (many of which have launched initial operations), the proximity of key events and guidance that the Public Investment Fund will keep domestic spending largely unchanged in its new five-year plan, will also support growth," Fitch noted.

The King Fahd Industrial Port in Yanbu, Saudi Arabia (SPA)

"The fiscal deficit is projected to narrow in 2026 owing to higher oil revenues, as prices will offset lower volumes. Spending will also rise, reflecting the impact of the war, but much of the jump in 1Q was the precautionary frontloading of spending from later in the year," it said.

Fitch forecasts that lower oil revenues will widen the deficit to 4.7% in 2027, consistent with a fiscal breakeven oil price of USD94/b.

Spending is expected to decline in 2027, due to an easing of war-related pressures, lower capex and ongoing efforts to reduce rigidities in current spending. Expenditure adjustment will allow the deficit to narrow in 2028 despite a projected further fall in oil prices.

"Our fiscal projections are consistent with a further increase in debt/GDP, which we project at 41.3% at end-2028 (projected peer median of 58.1%), from 31.8% at end-2025. based on deposits remaining around 10% of GDP," said Fitch.

"Fitch forecasts a small current account surplus for 2026 due to higher oil export revenues. Lower oil prices and ongoing domestic demand growth that has a heavy component of imported goods, services and labor, will lead to a deficit of 5% of GDP by 2028. Current account deficits will be financed by external borrowing and the ongoing reorientation of public assets to domestic from foreign investments," it continued.

"Banks have been resilient to the war and did not require any support measures from the central bank," it stressed. "At end-1Q, non-performing loans were 1.1% and the Tier 1 capital ratio 19.2%, both improved from end-2024. Credit growth has slowed, particularly mortgages, in response to policy measures, and is being outpaced by deposit growth."

Fitch maintained its mid-year 2026 sector outlook for Saudi banks at "neutral".

Business

Renewed US-Iran Conflict Narrows Egypt’s Economic Growth Prospects

 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 
 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 
TT
TT

Renewed US-Iran Conflict Narrows Egypt’s Economic Growth Prospects

 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 
 A traditional market in Egypt’s Giza Governorate. (Asharq Al-Awsat) 

The renewed US-Iran conflict in the Middle East is expected to further curb Egypt’s economic growth prospects as global oil prices are forecast to rise again, while several sectors of the economy continue to grapple with the effects of months of conflict, analysts say.

In its latest World Economic Outlook report released days ago, the International Monetary Fund (IMF) lowered its forecast for Egypt’s economic growth in fiscal year 2026-27 to 4.4 percent, down from the 4.8 percent projected in April. The IMF cited “the continuing impact of the Iran conflict — particularly the closure of the Strait of Hormuz — on the Middle East, weaker investment, higher financing costs, and persistent uncertainty.”

Economist Wael El-Nahas said the downgrade is “not limited to Egypt but reflects the global economy as a whole in light of the conflict’s repercussions,” describing the revision as both natural and expected.

Speaking to Asharq Al-Awsat, El-Nahas noted that the current period of skirmishes between the two sides could be viewed as a period of tacit understandings, allowing oil supplies to keep flowing while limiting sharp increases in food prices and other commodities. However, he warned that a renewed conflict would bring “a much worse period.”

Financial markets researcher Mohamed Mahdy Abdulnabi told Asharq Al-Awsat that geopolitical tensions are the main driver behind the weaker growth outlook.

He said Egypt faces several challenges under the current circumstances, including higher borrowing costs, greater reluctance among lenders to extend new financing, declining foreign investment, stagnation in the private sector, and continued losses at the Suez Canal.

President Abdel Fattah al-Sisi has previously estimated the canal’s losses at $10 billion, citing regional tensions and their impact on Red Sea shipping.

Abdulnabi warned that if the conflict persists, pressure on Egypt’s economy will intensify. “When global oil prices fell below $70 a barrel, the Egyptian government did not cut domestic fuel prices. But as soon as prices began rising again, discussion resumed over the automatic fuel pricing mechanism and the need to increase fuel prices,” he remarked.

The government raised fuel prices by between 14 and 30 percent last March, just 10 days after the US-Iran conflict erupted, amid rising energy import costs.

El-Nahas warned that global oil prices could climb above $100 a barrel, noting that Egypt’s current state budget is based on an assumed oil price of about $75 a barrel. Any increase, he said, would raise the country’s energy import bill and widen the budget deficit. He also cautioned that it could trigger another round of fuel price hikes, further worsening the cost-of-living crisis.

Egypt’s annual inflation rate stood at 14.3 percent in June, down slightly from 14.6 percent in May.

Despite the risks, El-Nahas stressed that some sectors, particularly tourism, still have strong growth prospects despite the renewed US-Iran conflict.

 

 

Business

China Temporarily Bans Helium Exports as US-Iran Tensions Flare Again

Ships and containers at a Chinese port (Reuters)
Ships and containers at a Chinese port (Reuters)
TT
TT

China Temporarily Bans Helium Exports as US-Iran Tensions Flare Again

Ships and containers at a Chinese port (Reuters)
Ships and containers at a Chinese port (Reuters)

China announced on Friday a temporary export ban on helium, effective immediately, as resumption of military conflict in the Middle East threatens to trigger new shortages of the gas critical for chip manufacturing.

Earlier this year, the US-Israeli war on Iran led to helium shortages, disrupting companies globally, including in China, where the AI industry increasingly relies on domestic chips for training and ⁠running AI models. Helium is essential for heat management in semiconductor production.

The helium ban is the latest example of Beijing seeking to prevent domestic shortages of critical materials by curbing exports. It has previously imposed similar measures on fuel, fertilizers and sulfuric acid.

China is also looking to boost domestic chip manufacturing capacity and reduce the industry's dependence on cutting-edge Nvidia semiconductors that fall under US export controls.

China is heavily ⁠dependent on overseas helium despite efforts to expand domestic production.

Still, the export ban could squeeze global supply further because Chinese companies have increasingly acted as intermediaries, importing Russian helium and re-exporting some volumes to overseas markets, including Europe.

According to Reuters, analysts ⁠estimate China imports around 85% or more of its helium requirements. Qatar accounts for a major share of global helium output and has supplied more than half ⁠of China's imports in recent years.

Helium is extracted from natural gas fields with unusually high helium concentrations and cannot be quickly manufactured from ⁠other industrial processes.

In chipmaking, it is used for wafer cooling, plasma etching, chemical vapor deposition, atomic layer deposition, lithography support and leak detection.