Gulf Economies Poised for Growth with Anticipated Rate Cuts and Increased Oil Output
The Gulf economies are gearing up for growth as interest rate cuts and a rise in oil output are on the horizon, according to new data.
Slowdown in GDP Growth Expected in the Gulf due to OPEC+ Output Cuts
The latest Middle East and North Africa Gross Domestic Product report from UK-based research firm Capital Economics highlights a delay in GDP growth due to OPEC’s decision to maintain low output levels until October.
OPEC+ has been implementing significant output cuts since late 2022, totaling 5.86 million barrels per day, which has impacted global demand. The recent extension of cuts until 2025 will further delay the expected boost to GDP.
Monetary Easing and Inflation Slowdown to Support Growth in Gulf Economies
Despite the delay in oil-related sectors, non-oil segments are expected to continue growing strongly. A monetary loosening cycle is anticipated to begin soon, following the footsteps of the US Federal Reserve.
Inflation in the Gulf is projected to ease in the second half of the year, providing relief to real incomes and boosting credit demand and consumer spending.
Country-Specific Economic Outlooks
The UAE and Qatar are expected to maintain loose fiscal policies, leveraging their strong balance sheets for economic support. Kuwait, Oman, and Bahrain, on the other hand, will need to maintain tight fiscal stances to navigate economic challenges.
Saudi Arabia’s Economic Scenario
Saudi Arabia’s decision to keep oil output low will limit GDP growth in the short term, according to the report. Despite efforts to manage crude prices, revenue is expected to decline next year, potentially leading to spending cuts by the government.
However, the Saudi economy showed growth in the first quarter of 2024, ending a technical recession. With plans to gradually increase oil output, the Kingdom is expected to see growth rates pick up in the coming years.
Fast Facts
– Saudi Arabia’s economy is projected to grow modestly this year, with accelerated growth expected in the following years as oil output increases.
– The UAE is positioned as the fastest-growing economy in the Gulf, with GDP growth projections of 3.3 percent this year and 5.5 percent in 2025.
Economic Trends in the Gulf and Beyond
The Gulf economies face challenges and opportunities as they navigate through changes in oil output and fiscal policies. Meanwhile, countries outside the Gulf are also experiencing shifts in economic policies and growth expectations.
Overall, the MENA region is forecasted to see GDP growth of 1.5 percent this year, with expectations of accelerated growth in the coming years, outpacing consensus estimates.