GCC economies set to grow 2.1pc on higher oil prices

14 June, 2021 12:00 AM printer

DUBAI: Growth in the GCC is expected to rebound to 2.1 per cent this year as oil prices increase, movement restrictions to stem the coronavirus ease, vaccination campaigns progress and regional governments step up spending ahead of major events, according to a new report.

The latest projection is 0.5 per cent higher than the forecast provided three months ago, the ICAEW Economic Update: Middle East report, commissioned by the Institute of Chartered Accountants in England and Wales and compiled by Oxford Economics, said.

Preparation for various regional events, such as Expo 2020 in Dubai and the 2022 FIFA World Cup in Qatar, and spending by Saudi Arabia’s Public Investment Fund will support growth, it added, reports AFP.

The region’s economies are also in a good position to capitalise on the travel demand when the rest of the world opens up, according to the report.

“The rise in the oil price has boosted revenue prospects for GCC producers, which derive 40 to 90 per cent of total fiscal income from oil,” Scott Livermore, ICAEW economic adviser and chief economist at Oxford Economics, said. “Higher oil revenue gives governments more scope to support post-pandemic recoveries without undermining efforts aimed at improving medium-term fiscal sustainability.”

The non-oil economies of the six-member GCC are set to increase by an average 3.1 per cent this year after contracting 4.1 per cent last year, a separate report by the Institute of International Finance said in March.

Meanwhile, the Middle East’s gross domestic product will grow by 2.4 per cent this year, a similar rate to the region’s average growth trajectory in the last decade, the report said.

“The outlook for most Middle Eastern economies looks positive this quarter, but keeping coronavirus levels low will be essential to ensure economies can return to growth,” Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia, said.

“Governments across the region must keep developing sectors and industries that foster innovation and continue implementing reforms to diversify economies and accelerate them into the post-Covid era.”