The World Bank said that the UAE is expected to record the lowest growth rate in the Gulf due to the failure of government plans and the spread of corruption.
Following a year of economic distress, Gulf Cooperation Council (GCC) economies are expected to return to an aggregate growth of 2.2% in 2021, according to the latest issue of the World Bank Gulf Economic Update (GEU) titled “COVID-19 Pandemic and the Road to Diversification“. This growth is buoyed by the global economic recovery, projected at 5.6% and the revival of global oil demand and international oil prices.
The report indicated that the Corona pandemic and the decline in global demand for oil and its prices had hit the Gulf Cooperation Council countries with a health crisis and a shock that shook primary commodity markets, which led to a GDP contraction of 4.8% in 2020.
It is expected that the fiscal deficit will continue for most of the forecast period and that Kuwait, Bahrain and Oman, which are the countries that recorded the largest deficits in public budgets in 2020, will continue to record deficits throughout the years 2021-2023, but with lower percentages of GDP in 2023 than they were During the downturn in economic activity in 2020.
The expectations of the World Bank for the Gulf countries were as follows:
Bahrain will continue to rely on fiscal support measures in 2021 to overcome the economic downturn in 2020. The growth rate is expected to reach 3.3% in 2021 and continue at the same pace in the medium term.
Kuwait: Oil exports will continue to enhance the growth dynamics in Kuwait. Economic growth is expected to rebound to a moderate level of 2.4% in 2021 before increasing to an average of 3.2% in 2022-2023.
Oman’s economy is expected to recover in 2021, albeit with an average growth rate of 2.5%, with the momentum of a major infrastructure investment program intensifying. In the medium term, the growth rate is expected to average 5.3% during the forecast period.
Qatar: Qatar is expected to witness a strong recovery in the growth rate, as the demand for LNG in South and East Asia supports the economic prospects in the medium term. The Qatari economy is expected to register a growth rate of 3% in 2021 before accelerating its pace to 4.1% in 2022 and 4.5% in 2023.
Rising global demand for oil will support the economic recovery in Saudi Arabia in 2021, and GDP is expected to grow by 2.4% in 2021. In the medium term, the growth rate is expected to average 3% during the forecast period.
The UAE is expected to return to the growth path in 2021, with an estimated growth rate of 1.2% before accelerating to 2.5% in 2022 and 2023, supported by government expenditures and the establishment of Expo 2020 in October 2021.
According to a report on the latest economic developments in the Gulf region, the reduction in oil production and the fall in its average price to its lowest level in four years – $41.30 a barrel – reduced the Gulf Cooperation Council exports of goods and services by 8.1% in real terms, and transferred the account surplus. The current budget of 6.8% of GDP in 2019 will lead to 2.9% in 2020.
The GDP of the non-oil sectors is now relatively larger in all the GCC countries than it was 10 or 20 years ago, but there is still a lot of work to be done.
Many of these countries are still highly dependent on oil and gas exports, which account for more than 70% of total merchandise exports in Kuwait, Qatar, Saudi Arabia and Oman, and on oil revenues that exceed 70% of total government revenues in Kuwait, Qatar, Oman and Bahrain.