UAE, Saudi Arabia to Drive Economic Growth in 2019

Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA)
Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA)
TT

UAE, Saudi Arabia to Drive Economic Growth in 2019

Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA)
Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA)

The GCC is expected to post economic growth of 2.3% in 2019, a marginal improvement on the previous year of 0.3 percentage points, according to ICAEW’s latest Economic Insight report. The GCC economy will be weighed down by renewed Opec-plus oil production cuts and lower oil prices, with the main source of growth coming from the non-oil sector.

Economic Insight: Middle East Q1 2019, produced by ICAEW and Oxford Economics, says that despite a strong drive in recent years by GCC authorities to diversify their economies, oil continues to play a dominant role, constituting up to 46% of total GDP. As such, the renewal of the OPEC-plus oil production cuts will limit the oil sector’s contribution to overall growth in 2019.

The oil sector will also be dampened by lower prices, forecast at US$64pb in 2019, down by US$7pb from the average in 2018. The oil price trajectory suggests many GCC countries will struggle to balance their budgets in 2019, as the price needed to cover their expenses is well above the current forecast, notably in Bahrain and Saudi Arabia, which need average oil prices of US$110pb and US$78pb respectively in 2019.

The non-oil sector in the GCC is expected to be the primary engine of growth in 2019, which is as 3.1%. This should be supported by higher government spending, notably in the UAE and Saudi Arabia, continued reforms and project spending like the UAE’s Expo 2020, as well as stimulus plans geared to support the private sector.

Mohamed Bardastani, ICAEW Economic Advisor and Senior Economist for Middle East at Oxford Economics, said: “As lower oil prices and production cuts hit the GCC, the non-oil sector will be the main growth engine in 2019. Recent oil market volatility highlights the region’s need for continued diversification efforts, including fiscal and structural reforms. GCC governments will have to play an ever-growing role in stimulating economic growth in 2019.”

As for the UAE, the report shows that economic activity there is set to accelerate to 2.2 percent in 2019, up from an estimated 1.7 percent in 2018. This will be buoyed by a pick-up in non-oil activity, rising public spending at the Federal and Emirate levels, higher investment ahead of the highly anticipated Expo 2020 and continued regional economic recovery.

The report says oil production in the UAE picked up in 2018 to mitigate for tightening global oil markets.

Oil production is expected to rise further and average 3.07m b/d this year, up from an average of 3m b/d in 2018, reflecting continued investment by the UAE to expand production capacity. The oil sector is forecast to grow by around 2.5% in 2019, marking the fastest growth rate for the sector in three years. But higher production will be weighed down by lower oil prices in 2019.

In contrast, the UAE’s non-oil sector is expected to accelerate from an estimated 1.3% in 2018 to 2.1% in 2019. Growth in the non-oil sector will be supported by expansionary budgets and various pro-growth government initiatives, notably in Abu Dhabi and Dubai, which collectively account for an estimated 90% of the UAE’s GDP.

The Dubai government has also announced a number of initiatives to support growth, including lowering certain taxes and fees and measures to reduce the overall costs of doing business for key industries. Large-scale projects in preparation for Expo 2020 and new visa rules are expected to continue boosting tourist arrivals in UAE, helping Dubai to maintain its status as a major global tourist and FDI destination.

Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA) said: “The UAE has done a tremendous job in implementing much-needed economic reforms in its aim to diversify the economy and achieve its Vision 2021 goals. Large-scale projects in preparation for Expo 2020, new visa rules, expansionary budgets, and various pro-growth government initiatives are expected to contribute to the overall growth of the economy this year. The predicted growth of the non-oil sector underscores the UAE’s ambitious economic transformation agenda.”

Despite general improvements in the macroeconomic environment, the real estate market remained weak throughout 2018 as residential sales prices continued to fall. The real estate market slump has weighed heavily on Dubai’s stock market, which was down by nearly 24% year-on-year in February 2019, while Abu Dhabi’s stock market was more insulated, growing by 8% year-on-year in January 2019. Real estate market conditions are unlikely to see a notable rebound this year, reflecting strong anticipated supply growth and still sluggish job market conditions.

Job creation also slowed from 2.6% in the first three quarters of 2017 to 1.6% for the same period in 2018. More tellingly, key sectors shed some jobs: total employment in services, which accounts for almost 20% of total employment, was down by 1.3% year-on-year in Q3 2018, while ‘transport, storage and communication’ and ‘manufacturing’ sectors declined by 4% and 1.1% respectively over the same period.



Gold Holds Steady, Eyes Fourth Weekly Gain on US-Iran Peace Deal Hopes

Samples of gold displayed in a program affiliated with the Brazilian Federal Police specializing in tracking gold in Brasilia (Reuters)
Samples of gold displayed in a program affiliated with the Brazilian Federal Police specializing in tracking gold in Brasilia (Reuters)
TT

Gold Holds Steady, Eyes Fourth Weekly Gain on US-Iran Peace Deal Hopes

Samples of gold displayed in a program affiliated with the Brazilian Federal Police specializing in tracking gold in Brasilia (Reuters)
Samples of gold displayed in a program affiliated with the Brazilian Federal Police specializing in tracking gold in Brasilia (Reuters)

Gold held largely steady on Friday and was on track for a fourth straight weekly gain, as hopes for a US-Iran peace deal eased fears of higher inflation and elevated interest rates.

Spot gold eased 0.1% to $4,784.72 per ounce by 0646 GMT, but was up about 1% so far this week. US gold futures for June fell 0.1% to $4,805.20.

A 10-day ceasefire between Lebanon and ‌Israel went ‌into effect on Thursday and US President Donald ‌Trump ⁠said the next meeting between ⁠the United States and Iran may take place over the weekend.

"Investors are now watching closely for concrete progress in US-Iran negotiations. Any progress or extension of the current fragile ceasefire could further calm oil markets and inflation fears, potentially unlocking more upside for gold," said Tim Waterer, chief market analyst at KCM Trade.

The US dollar was headed ⁠for a second weekly drop, making greenback-denominated commodities ‌more affordable for holders of other currencies, Reuters said.

Oil ‌prices fell, easing fears of higher inflation on optimism that the Iran ‌war could be nearing an end.

Concerns that higher energy prices ‌could stoke inflation and keep global interest rates higher for longer have driven down gold prices by more than 8% since the Iran war began in late February.

While gold is considered an inflation hedge, higher interest rates crimp ‌demand for the non-yielding asset.

Traders now see a 27% chance of a 25-basis-point Federal Reserve interest ⁠rate cut in ⁠December. Before the war, there were expectations of two reductions for this year.

Meanwhile, Indian banks have halted gold and silver import orders from overseas suppliers, with tons of the metals stuck at customs as a formal government order has not been issued authorizing bullion imports.

Gold demand in India was modest this week, as high domestic prices weighed on retail purchases ahead of the key Akshaya Tritiya festival weekend, while premiums in China held steady.

Spot silver rose 0.3% to $78.61 per ounce, and was headed for a fourth straight weekly gain.

Platinum fell 0.3% to $2,079.24 and palladium was down 0.5% at $1,542.50. Both the metals were on track for a third straight weekly gain.


IMF: Middle East Faces Pivotal Economic Moment

Azour speaks during a presentation of the Regional Economic Outlook update (AFP)
Azour speaks during a presentation of the Regional Economic Outlook update (AFP)
TT

IMF: Middle East Faces Pivotal Economic Moment

Azour speaks during a presentation of the Regional Economic Outlook update (AFP)
Azour speaks during a presentation of the Regional Economic Outlook update (AFP)

The International Monetary Fund said the Middle East, North Africa, and Pakistan were facing a pivotal and exceptionally difficult moment in their modern economic history after the war that broke out on Feb. 28, 2026, describing it as a severe and multifaceted shock to one of the world’s most strategically important economic corridors.

The IMF said the conflict was not merely a border crisis but had disrupted “three pillars of stability, energy markets, trade routes, and business confidence,” triggering a global energy shock and weakening supply chains.

Amid these challenges, Saudi Arabia’s economy emerged as a model of resilience, showing what the IMF described as “exceptional sturdiness” that enabled it to absorb the impact of disruptions to the Strait of Hormuz and a decline in regional output, supported by the pillars of Vision 2030, which strengthened fiscal discipline and logistical flexibility.

Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said while presenting an update of the Regional Economic Outlook in Washington, on the sidelines of the IMF and World Bank Spring Meetings, that the war was reshaping the region’s economic outlook.

At the center of the shock was energy, he said, noting that the Strait of Hormuz, “the world’s most critical energy chokepoint, through which roughly one-fifth of global oil supply and about one-quarter of global LNG trade normally transit,” had come close to a standstill.

He said disruptions and shutdowns had cut oil and gas output across Gulf Cooperation Council countries, pushing Brent crude above $100 a barrel, while “European gas prices rose by roughly 60 percent, exceeding the spike observed after Russia’s invasion of Ukraine,” putting global energy security at risk.

He said energy disruptions caused by the war would weigh heavily on Gulf exporters, while oil-importing countries such as Egypt and Jordan were facing higher commodity prices and weaker remittance flows.

More broadly, the Middle East and North Africa region is expected to see a marked slowdown in growth this year, with real GDP projected at about 1.1%, significantly below pre-war forecasts, before a recovery in 2027, according to the IMF.

Azour said the shock extended beyond oil and gas, noting that “commodity disruptions extend beyond oil and gas,” affecting fertilizers, chemicals, and other products in which the region holds a strategic position.

He warned that rising food costs were directly threatening vulnerable populations, saying that “these price increases translate directly into higher food costs for some of the world’s most vulnerable populations,” particularly in import-dependent economies across the region and beyond.

He added that the conflict had also affected services, saying, “air traffic collapsed at major Gulf hubs, maritime insurance premiums surged, shipping routes lengthened, and logistics chains weakened,” highlighting the broad impact on aviation and logistics.

The IMF said some oil-importing economies in the region relied heavily on Gulf countries for energy imports and financial flows, leaving them exposed if the conflict intensified or persisted.

Saudi experience

Azour said one of the most important lessons from the war and the disruption of the Strait of Hormuz was the need to diversify trade routes.

“This shock underscores the importance of building greater resilience and strengthening integration,” he said, adding that this includes “diversifying trade routes and deepening regional cooperation,” to ensure the continued flow of goods and energy.

He said Saudi Arabia’s approach under its strategic vision went beyond infrastructure development to a broader reshaping of logistics networks. By expanding alternative ports on the Red Sea and strengthening land and rail connectivity, the kingdom reduced its reliance on a single maritime chokepoint.

He said this ability to create parallel trade routes allowed Saudi trade to continue effectively despite disruptions to regional corridors, offering a model for protecting economic security and ensuring uninterrupted supply flows.

Egypt

Azour said economic reforms implemented by Egypt, along with stronger policy buffers, were helping the country better manage external shocks.

He said allowing the exchange rate to become more flexible helped absorb shocks, while higher reserves provided reassurance to markets.

Regional divergence

The IMF report highlighted a sharp divergence across countries. Qatar faced a steep downgrade to growth forecasts due to damage to its gas infrastructure, while Oman showed relative resilience given its geographic position outside the Strait of Hormuz.

At the same time, financing pressures increased on Egypt, Pakistan, and Jordan as sovereign spreads widened, prompting Azour to stress that the IMF stood ready to support countries.

He said that if oil production recovered and the Strait of Hormuz fully reopened, countries would be able to increase output quickly, adding that higher oil prices compared with pre-2026 levels would help producers recover some of their losses from the crisis.


Pakistan Central Bank Receives $2 billion from Saudi Arabia as Part of Broader Financial Support Package

Mohammed Al-Jadaan and Muhammad Aurangzeb following the agreement for Saudi Arabia to provide an additional $3 billion in support to Pakistan (X).
Mohammed Al-Jadaan and Muhammad Aurangzeb following the agreement for Saudi Arabia to provide an additional $3 billion in support to Pakistan (X).
TT

Pakistan Central Bank Receives $2 billion from Saudi Arabia as Part of Broader Financial Support Package

Mohammed Al-Jadaan and Muhammad Aurangzeb following the agreement for Saudi Arabia to provide an additional $3 billion in support to Pakistan (X).
Mohammed Al-Jadaan and Muhammad Aurangzeb following the agreement for Saudi Arabia to provide an additional $3 billion in support to Pakistan (X).

Pakistan announced that it has received $2 billion from Saudi Arabia’s Ministry of Finance as part of a broader financial support package.

Earlier, Pakistan’s Finance Minister, Muhammad Aurangzeb, said that Saudi Arabia had committed to depositing an additional $3 billion, while extending an existing $5 billion loan for three years instead of renewing it annually.

This support comes as Pakistan faces repayment of $3.5 billion to the United Arab Emirates, putting pressure on its reserves, which stand at about $16.4 billion.

Saudi Arabia has a history of assisting Pakistan during economic crises, including a $6 billion support package in 2018 that included deposits and deferred oil payments.