GULF Gulf, the fall in oil revenues slows economic growth

It impacts the increase in crude oil prices and the consequent cut in production imposed by the OPEC+ countries. For Riyadh, the figure should stand at 3.2% in 2023, down from 8.7% last year. Similar data for the Emirates, which went from 7.6% to 3.7%. Inflation figures also weigh.

Riyadh () – The economies of the Gulf Cooperation Council (GCC) countries will grow at a much slower pace in 2023 than last year, due to the substantial impact on revenues from oil sales and cuts in raw production. According to a study prepared by Reuters experts that was published a few days ago, hydrocarbons are the ones that have the greatest impact, with an increase in the prices of black gold of around 20% compared to the lowest point that was reached on March 20. , around 70 dollars a barrel. This is mainly due to the decision of the OPEC+ exporting countries to cut production by 1.16 million barrels per day, and to the reopening of China.

Furthermore, further gains will largely depend on a slowdown in global demand in the coming months, which is not good news for economies that are fundamentally dependent on oil revenues. In the first place, Saudi Arabia, the main player in the world market, whose economy would grow by 3.2% in 2023, a value of less than half compared to the maximum of +8.7% of the last decade, which was registered on last year.

The study is based on interviews with 16 of the world’s leading economic experts, which were conducted between April 6 and 25. Considering the immediate future, the growth rate in 2024 should remain at the same levels as the current year. “Cuts in oil production -says James Swanston, specialist in emerging markets at Capital Economics- will cause a sharp slowdown in GDP growth in Saudi Arabia this year […] and in the rest of the Gulf countries, and the double whammy related to the decrease in crude oil production and prices will have an impact on GDP both in the oil sector and in those not related to hydrocarbons”.

The United Arab Emirates (UAE), the second largest economy of the Gulf countries, forecasts a growth figure of 3.7% for 2023 and 4% for next year. This is data well below the significant 7.6% registered in 2022. Both Qatar and Bahrain already had lower growth expectations for this year, with a figure of 2.7%, while Oman is expected to increase by 2.6%. and Kuwait even less, 1.5% in 2023.

The slowdown in the GCC countries is not surprising, since it goes hand in hand with the values ​​registered in the main global economies. These show a slowdown related to the double threat of rate hikes and high inflation weighing on consumer demand. However, the inflation outlook in the Gulf countries has initially been more subdued than forecast for many major economies.

Inflation in the region is expected to range between 2.1% and 3.3% this year and then decline in 2024. The countries of the bloc had already shown in the past their intention to reduce their dependence on fossil fuels and income oil – its main source of income – while world policies move in the direction of green energy. To sustain economic growth through non-oil revenue, countries like Saudi Arabia, the United Arab Emirates, and Qatar have promoted and hosted major sporting events and world expos, and multiplied large infrastructure projects to attract tourists.

“Tourism receipts are very likely to outpace GDP growth in 2023,” says Ralf Wiegert of S&P Global Market Intelligence. “Saudi Arabia – he adds – will continue to invest heavily in projects related to Vision 2030 and keep the budget close to balance. Ultimately, with oil prices no longer increasing, it raises the possibility of a modest (fiscal) deficit in 2024 and 2025.”