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Strong GCC non-oil growth spurs Mena economic prospects

World Bank projects UAE’s real GDP growth to accelerate to 3.9% in 2024

Driven by strong non-oil growth in GCC, economic prospects for the Middle East and North Africa region in have improved modestly with real GDP growth for the region as a whole now projected at 3.3 per cent in 2025.

“Stronger non-oil growth in GCC countries is the key factor behind the revisions, although our narrative of a slowing non-oil economy over the course of 2024 still holds,” analysts at S&P Global Market Intelligence said.

The World Bank projects real GDP growth in the UAE to accelerate to 3.9 per cent in 2024, fuelled by Opec+’s announced significant oil production hike in the second half of 2024 and a recovery in global economic activity. Oil output growth is projected to reach 5.8 per cent in 2024. Non-oil output will remain robust and continue to support economic growth in 2024, expanding at 3.2 per cent, driven by strong performance in the tourism, real estate, construction, transportation, and manufacturing sectors.

While annual global real GDP growth is projected at 2.7 per cent this year and the next, a soft patch for quarter-over-quarter growth rates is increasingly likely during the second half of 2024, with investment and global trade hindered by high uncertainty. A pick-up is expected to follow during 2025 and 2026 as more accommodative financial conditions gradually filter through, they said in their August Global Economic Forecast Update.

Ken Wattret, global economist at S&P Global Market Intelligence, said early August’s extreme market turbulence has eased off, but the uncertain economic and policy outlook point to a bumpy ride still. “Fears of an imminent US recession look overdone, with markets overreacting to noise in some recent data. Although a hard landing cannot be ruled out with monetary policy still restrictive, our take remains that the economy is transitioning to a period of below-potential growth.”

According to the Institute of Chartered Accountants in England and Wales (ICAEW), the GCC’s non-oil sector will remain the key growth driver for the region in 2024 and beyond while the overall GDP is expected to slow to 2.2 per cent as the oil output is projected to shrink due to Opec+ group’s extension of voluntary output cuts through the third quarter.

The Economic Insight report commissioned by ICAEW and compiled by Oxford Economics, said the extended output cuts imply a delayed recovery in GCC energy sectors as oil output will shrink by 2.6 per cent this year instead of the 1.3 per cent expansion forecasted three months ago.

The GCC growth forecast has been revised down to 2.2 per cent from 2.7 per cent three months ago, though non-energy sectors remain resilient, including in Bahrain and Qatar.

However, the World Bank has revised its economic outlook for the GCC region, reflecting a brighter future but a slightly slower present

In its Spring 2024 Gulf Economic Update, the bank predicts regional growth to reach 4.7 per cent in 2025, a significant upward adjustment from the previous projection of 3.8 per cent. It expects the UAE’s economy to grow 3.9 per cent in 2024 on higher oil production. The World Bank expects oil output growth to reach 5.8 percent in 2024. Meanwhile, non-oil output will remain robust, expanding at 3.2 percent. Hence, the UAE has shown strong performance in the tourism, real estate, construction, transportation and manufacturing sectors.