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GCC economies poised for strong second half

High energy prices, robust equities to spur countries' growth

Based on recent economic data, Forex.com analysts have indicated that GCC countries exhibit a positive economic outlook for the second half of 2023 thanks to several factors.

Firstly, GCC stock markets have been dominant in global initial public offerings (IPOs), accounting for a significant portion of IPO proceeds in 2022. A robust IPO pipeline is also expected for 2023, indicating continued growth in GCC stock markets. Moreover, ongoing economic recovery, high demand for equities, and diversification initiatives are expected to benefit GCC stock markets, which may also draw profit from the projected global GDP growth of 2.9 per cent for 2023.

However, in their report, analysts do mention the importance of remaining cautious and keeping a close eye on market-specific challenges during the second half of 2023. They’ve underlined that the risk of a global economic slowdown could impact GCC stock markets, while higher interest rates, inflation, and less-accommodating debt capital markets could pose challenges for GCC corporate and infrastructure issuers. Furthermore, geopolitical tensions in the global economy may affect market sentiment, and despite a strong IPO pipeline, challenges exist in attracting private companies to the market.

Nonetheless, the overall economic outlook for the GCC remains positive, especially after considering the current and projected growth in the non-oil sector, which is driven by thriving industries like hospitality, retail, travel and tourism, real estate, financial services, technology, and healthcare. Accordingly, both the UAE and Saudi Arabia are poised for robust growth with an anticipated non-oil sector expansion of 4.8 per cent each during the second half of 2023. Other GCC countries also show positive trends despite the fact that oil production cuts may impact future growth.

Speaking of oil, market experts explain that the crude oil market is influenced by multiple factors, which makes it more complicated to render an accurate outlook for the second half of 2023. Such factors may include: economic uncertainty, Opec production cuts and supply disruptions, geopolitical tension, demand-supply dynamics, and energy transition and climate policies which may impact long-term demand and market sentiment.

Nevertheless, Ritu Singh, Regional Director of Stone X Group Inc., confirms that an optimistic scenario is possible, saying: “Despite the decline in crude oil prices during the first half of the year, there may be an upward pressure moving forward due to expected draws in global inventories. As such, the global oil demand is projected to grow by 2.4 million barrels per day.”

As per experts, both the GCC stock markets and crude oil prices are subject to dynamic factors, inviting traders to regularly check the latest market analyses that enable them to plan their next trading move on more solid grounds.