Reuters: The Gulf region will witness faster growth in 2022, and the decline in oil is the biggest risk
The possibility of falling oil prices represents the biggest risk to the growth prospects of the Gulf Cooperation Council countries.
A Reuters poll of economists showed that the six Gulf Cooperation Council countries will witness the fastest economic growth in years, but economists have warned that the possibility of a decline in oil prices represents the biggest risk to these expectations.
Oil prices, which are a major factor driving the economy of the Gulf states, rose to their highest levels since 2014 last Wednesday, supported by escalating global political tensions in major producing countries, including the UAE and Russia, which may lead to a decline in supplies.
And 25 economists predicted in the poll, which was conducted from January 11 to 19, that the six countries will witness faster growth this year than was expected 3 months ago.
Saudi Arabia topped the list of expectations with a growth of 5.7%, followed by Kuwait and the UAE with a growth of 5.3% and 4.8%, respectively. Qatar, Oman and Bahrain are expected to witness an average growth between 3% and 4% in 2022. If this is achieved, this will be the best growth rate these countries have seen in several years.
“Despite the relatively tight fiscal policy and some external headwinds, we expect GCC economies to experience faster growth in 2022 as they continue to benefit from the progress made last year,” Khadija Haq, head of research and chief economist at Emirates NBD, told Reuters. .
“Although the outlook for 2022 is still relatively constructive, a high degree of ambiguity remains, especially regarding the evolution of the coronavirus pandemic,” she added.
At a time when the global economy is dealing with the possibility of continued inflation, expectations for prices in the region are modest but varying, and inflation is expected to remain between 2% and 2.8% this year, and the lowest reading was for the UAE, Saudi Arabia and the Sultanate of Oman at 2%, and it was the highest in Qatar at 2.8%.
Saudi Arabia, the world’s largest oil exporter and the largest economic and political power in the region, will witness an economic growth of 5.7 percent this year. If this is achieved, it will be the fastest growth rate since 2012, when oil prices averaged about $111 a barrel.
In contrast to the increase in the average forecast in the poll conducted by Reuters last October, the expectations also showed higher increases and major declines, and the UAE economy is expected to grow by 4.8% this year, recording the fastest growth rate since 2015.
Reliance on energy prices accompanies the risk that the economic recovery will be negatively affected by any price turmoil due to geopolitical tensions or the global economic slowdown.
And 9 out of 10 economists who answered an additional question said that any drop in oil prices and the emergence of new mutations from the Corona virus are among the biggest risks to economic growth in the Gulf Cooperation Council this year.
“Low oil prices remain the biggest risks to the GCC region, and supply chain disruptions will continue to play a role and negatively affect the global economy,” said Ralph Wegert, head of the Middle East and North Africa economic team at IHS Markit. The Gulf Cooperation Council may not be affected as much.”
Wegert added that the growth of the Gulf Cooperation Council is very much on the upside already, and the GDP growth in the Gulf Cooperation Council is based on the assumption of strong global demand for oil in 2022.