Risks associated with the current conflict in the Gaza Strip could threaten the economic growth of the Gulf countries, especially if the armed conflict spreads to other regional players
In a recent Gulf Economy Review report, entitled “Economic Diversification Efforts Paying Off in GCC (Gulf Cooperation Council – ed.) Region but More Reforms Needed,” the World Bank (WB) announced that the Gulf countries as a whole will have to grow at least 1% in 2023 and then accelerate their economic development to further grow to 3.6% and 3.7% in 2024 and 2025, respectively.
According to World Bank experts, “efforts to diversify the economies of the Gulf countries and distance themselves from oil production as the only source of growth are bearing fruit, but further reforms are needed to consolidate the positive results.”
Among the most notable results, World Bank analysts cited the growing participation of women in the labor force: “Progress has been achieved primarily thanks to the trend started by Saudi Arabia, which promotes the economic emancipation of women,” said Johannes Kettl, senior economist at the World Bank.
In terms of the economic outlook for individual Gulf states, Saudi Arabia will face a 0.5% contraction in GDP this year, while a 4.1% recovery is expected in 2024. In Qatar, GDP growth will slow from 4.9% in 2022 to 2.8% this year and remain at this level next year. As for the economic situation in the United Arab Emirates, World Bank experts indicated that GDP will grow by an average of 3.4% in 2023 “due to weaker global activity, stagnant oil production, and more restrictive financial conditions.” Meanwhile, other non-oil sectors of the Emirates economy are expected to grow by 4.5%.
World Bank analysts emphasized that “the risks associated with the current conflict in the Gaza Strip could threaten the economic growth of the Gulf countries, especially if the armed conflict spreads to include other regional players.” According to the World Bank, “world oil markets are already entering a period of greater volatility.”
Finally, for Bahrain, growth should be at least 2.8% in 2023, with the non-oil sector becoming the main driver of the country’s economic development. However, after oil production fell in 2023, Kuwait’s economic growth was forecast to slow sharply to 0.8%. Instead, the country’s non-oil sector is expected to grow by 5.2%. Last on the list is Oman, which will slow to 1.4 percent this year following the decision by OPEC+ to cut oil production.