Middle East economies will see pick up in GDP growth this year
Mohamed Bardastani, ICAEW Economic Advisor and Senior Economist for Middle East at Oxford Economics
dubai — The GCC’s economic prospects for 2018 look brighter thanks to rising oil prices, higher government spending and steady progress in economic reforms, analysts and economists said.
Overall, the GCC’s GDP is expected to grow 2.3 per cent this year, up from 0.1 per cent last year. “And as Opec increases oil production, GDP growth is expected to accelerate further for oil exporters this year and in 2019,” said analysts at the Institute of Chartered Accountants in England and Wales (ICAEW).
The International Monetary Fund has said oil-exporting economies of the Gulf expect to see a pick-up in GDP growth in 2018 and 2019, after bottoming out in 2017, as the price of oil rebounds and non-oil business activity recovers.
“The rise in the GCC is due not only to a resurgence of oil prices but also to the improvement of government finances through the reduction of subsidies and, in the case of Saudi Arabia and the UAE, the implementation of VAT in January,” the IMF said.
The Institute of International Finance (IIF) said in a recent report that real GDP growth in the GCC is expected to improve to 2.2 per cent in 2018 from a contraction of 0.3 per cent last year, driven by a substantial increase in public spending and a gradual increase in oil production, particularly in Saudi Arabia, Real GDP growth will rise to 2.7 per cent in 2019, as the expansionary fiscal stance offsets the losses from monetary tightening, it added.
According to the report, higher
The rise in the GCC is due not only to a resurgence of oil prices but also to the improvement of government finances International Monetary Fund
oil prices this year have provided space for GCC authorities to boost government spending after three years of fiscal consolidation.
In Saudi Arabia, the expected 18 per cent increase in government spending, combined with the large
private sector stimulus, will boost non-oil growth, the IIF said.
“In the UAE, Abu Dhabi’s threeyear $13.6 billion stimulus package and Dubai’s several investment initiatives will help boost growth to 2.1 per cent in 2018 and 2.7 per cent in 2019 from 0.8 per cent in 2017,” the IIF said.
While the UAE economy will bounce back to 2.6 per cent in 2018 after a challenging year when growth slowed to a seven-year low to 1.5 per cent in 2017, the Saudi economy will grow by 1.8 per cent. Other GCC countries, including Bahrain (2.3 per cent), Kuwait (2.4 per cent) and Oman (3.6 per cent)
are also showing strong recovery in 2018. At the same time, Middle Eastern economies are also on track to recover from a difficult year in 2017, when growth slowed to an eight-year low at only one per cent, the ICAEW said in a report.
“Overall, the Middle East’s GDP is expected to grow 2.4 per cent in 2018, despite a relatively slow start in the first quarter and a heightened geopolitical environment. However, the outlooks and risk profiles for Middle Eastern economies vary,” said the report
“Middle East economies will see pick up in GDP growth this year and in 2019 but this doesn’t mean
we should let complacency set in. With growing global trade tensions, geopolitical risks and rising interest rates, economic reforms are more necessary than ever in order to ensure stronger, sustainable and inclusive growth,” said Mohamed Bardastani, ICAEW Economic Advisor and Senior Economist for Middle East at Oxford Economics.
The Kuwait Financial Centre, or Markaz, said in a report that the uptick in oil prices has buoyed GCC countries, which have resumed their capital spending to revive the economic growth that has stagnated in the recent past.