Expectations of a slowdown in the economy of the Gulf states in 2023 due to weak demand for oil

Expectations of a slowdown in the economy of the Gulf states in 2023 due to weak demand for oil
Expectations of a slowdown in the economy of the Gulf states in 2023 due to weak demand for oil
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Crude oil prices have fallen by more than a third from their highest levels in the past year (AFP)

A Reuters poll of economists showed that the economies of the six Gulf Cooperation Council countries will grow this year at half the rate of 2022, with oil revenues affected by expectations of a moderate global slowdown.

Crude oil prices, the main driver of Gulf economies, have fallen by more than a third from last year’s highs and are expected to remain under pressure this year on fears of weak demand due to recession in major economies.

Overall growth in the six GCC economies is expected to average 3.3 percent this year and 2.8 percent next year, according to the survey, which was conducted from the ninth to the 23rd of January, down from 4.2 percent and 3 percent. 3 percent in the previous poll in October.

Khadija Haq, Head of Research and Chief Economist at Emirates NBD Bank, said, “The outlook for 2023 is more cautious given the weaker external environment, but the GCC countries will likely continue to outperform many advanced economies in terms of GDP growth.” “.

“While growth in oil and gas production is expected to slow this year, continued investment to boost production capacity in the region should see the sector make a positive contribution to the main GDP again in 2023,” she added.

A separate Reuters poll showed that Brent crude is expected to average $89.37 a barrel in 2023, about 4.6 percent lower than the average of $93.65 in a November survey, and less than the average of $99 a barrel last year.

Saudi Arabia, the region’s largest economy and largest exporter of crude oil, is expected to grow by 3.4 percent this year and 3.1 percent in 2024, slightly outperforming the overall region. The Kingdom’s economy has previously recorded growth at a record rate of 8.8 percent in 2022.

In the UAE, economic growth this year is expected to be 3.3 percent, down from 6.4 percent last year.

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It is estimated that the economies of Qatar, Oman and Bahrain will grow at rates ranging between 2.4 and 2.7 percent in 2023, while Kuwait will grow by 1.7 percent.

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Experts in the survey indicated that despite the decline in oil-related GDP growth, non-oil growth is expected to show resilience in 2023.

Analysts expected that the major economies in the Gulf region would continue to record surpluses in current account accounts, given the relatively high oil prices.

They indicated that Saudi Arabia, the UAE, Qatar and Kuwait will record double-digit growth in current account surpluses in 2023, while the ratio will be in single-digits in the Sultanate of Oman and Bahrain.

With regard to inflation expectations, they were modest but at the same time divergent. The lowest expectations were for the Sultanate of Oman at 1.9 percent and the highest at 3.1 percent for the UAE.

Earlier this month, International Monetary Fund Director Kristalina Georgieva said that the year 2023 will be difficult for most of the global economy at a time when most of the main engines of global growth, namely the United States, Europe and China, suffer from weak economic activity.

And the Fund warned in a report last October that more than a third of the global economy will contract in 2023, and that there is a 25% chance that global GDP will grow by less than 2% in the new year amid a global recession.

It is expected that the Gulf countries will be able to achieve financial surpluses in the budgets of the current year 2023, with the exception of Bahrain and the Sultanate of Oman, benefiting from the rise in energy prices, but these surpluses will mostly be less than what was achieved in the past year 2022.

(Reuters, The New Arab)

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