Africa News UAE, Saudi Arabia to spur GCC non-oil economic pick-up

UAE, Saudi Arabia to spur GCC non-oil economic pick-up


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As coronavirus continues to reshape the global economic outlook for the coming quarters, growth in the GCC is poised to pick up on the back of stronger non-oil activity in Saudi Arabia and the UAE, economists said.

Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB), predicted that the GCC’s real non-oil GDP growth would accelerate to 2.6 per cent in 2020 from an estimated 2.1 per cent in 2019. “Stronger forecast non-oil activity in the UAE and Saudi Arabia is the key factor behind this estimated acceleration in regional growth,” said Malik.

In the UAE, she sees a boost from the Expo 2020 Dubai, “with the timing later in the year as positive given the near-term concerns over travel.”

She added the initial support related to Expo 2020 will be through investments, with the infrastructure being finalised for the event, followed by the boost to consumption activity – a rise in short-term employment and higher tourism. “We are also seeing traction building in Abu Dhabi’s investment programme, alongside the UAE having the most expansionary fiscal stance in the region in 2020. Our GCC forecast continues to reflect ongoing challenges to the non-oil economy, including real estate sector-related issues.”

Malik expects Saudi Arabia to see the strongest real non-oil growth in the region, with building investment momentum. Notably, funds have already been raised for the initial stages of the investment programme, and therefore it is less sensitive to any downward pressure on the oil price.

The World Bank recently slashed the growth forecast for the UAE, GCC, and Middle East and North Africa region for 2020 and 2021, due to geopolitical tensions and lower oil demand amidst a weakened global growth. In its January 2020, Global Economic Prospects report, the bank cut the UAE’s growth estimates for 2019, 2020, and 2021 by 0.8 per cent, 0.4 per cent, and 0.2 per cent respectively, from its June 2019 forecast.

Growth projections for Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain were also lowered by the World Bank. Overall, GCC countries are set to grow for 2019, 2020, and 2021 by 1.3 per cent, 1.0 per cent, and 0.1 per cent, respectively. Similarly, the Mena region’s growth rate has also been slashed by the World Bank for 2019 and 2020, but 2021’s rate remains unchanged.

Given the heightened global uncertainties stemming from the economic impact of the coronavirus, the ADCB economist lowered the average oil price and production assumptions for 2020.

“Consequently, we have made some tentative downward revisions to our headline GDP growth, fiscal and current account forecasts. We have also made a minor reduction to our real non-oil growth forecast for UAE of 0.1 percentage point – given the externally-facing nature of the non-oil sector with strong global linkages,” said Malik.

She assumed that most of the effect of the coronavirus on global activity would be in first quarter 2020 and would be felt in the GCC non-oil sectors via tourism, aviation and feeding into retail and hospitality. The impact of coronavirus will be severe on the trade and logistics sector, which would become more pronounced if China’s supply chain remained disrupted beyond the first quarter.

The downward pressure on the oil price comes at a time when GCC fiscal positions are already constrained, said Malik. “The GCC fiscal positions are expected to weaken in 2020 with the lower oil revenue outlook. The budgets have no fiscal adjustment measures except for limiting spending growth. Any further and sustained downward pressure on the oil price linked to the global backdrop could result in a need to meaningfully retrench spending, as was the case in 2015 and 2016.”

Copyright © 2020 Khaleej Times. All Rights Reserved. Provided by SyndiGate Media Inc. (


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