Recent developments in the Gulf Cooperation Council (GCC) region highlight a significant trend of new investments aimed at fostering economic growth. The region’s commitment to diversifying its economies, particularly through sectors like renewable energy and technology, signals a strategic approach to sustainable development. According to a recent World Bank report (Spring 2024), the GCC’s economic growth is projected to rebound, reaching 2.8% in 2024 and 4.7% in 2025, primarily driven by non-oil sectors.
Economic Growth Projections
The optimistic outlook for the GCC economies stems not only from the anticipated recovery in oil production but also from a robust non-oil economic momentum. The gradual easing of production quotas by OPEC+ in the second half of 2024 is expected to facilitate this recovery. Furthermore, the GCC nations’ ongoing efforts to diversify their economies underscore their strategic vision to enhance resilience and achieve sustainable development amid global economic fluctuations.
Despite these diversification efforts, hydrocarbon revenues remain critical in shaping public finances and external account balances in the medium term. The GCC’s overall fiscal surplus is expected to decline to 0.1% of GDP in 2024, while the current account surplus is projected to reach 7.5% of GDP, down from 8.4% in 2022.
Investment in Human Capital
To capitalize on the current momentum for economic diversification, the World Bank report emphasizes the importance of quality education in promoting long-term economic growth. A dedicated section of the report highlights the need for substantial improvements in learning outcomes, analyzing student performance over time, and evaluating how GCC countries fare against similarly income-level countries.
In her remarks, Safaa Al-Tayeb, the World Bank’s Regional Director for GCC Countries, noted that “quality education equips youth for better job opportunities and higher wages, which can drive economic growth.” While significant progress has been made over the last decade in learning outcomes, there is still much work to be done to align with international standards.
Country-Specific Economic Outlooks
- Bahrain: Economic prospects depend heavily on future oil market trends and the acceleration of structural reforms. Growth is estimated to rise to 3.5% in 2024, with the non-oil sector remaining the primary growth driver, supported by a recovery in tourism and infrastructure projects.
- Kuwait: Economic growth is expected to recover to 2.8% in 2024, aided by expansive fiscal policies and increased oil production. However, relatively high-interest rates may restrict domestic consumption, inhibiting economic potential.
- Oman: Oman’s positive economic outlook anticipates real growth of 1.5% in 2024, driven by increased gas production and efforts to diversify the economy, particularly in renewable energy projects.
- Qatar: Qatar’s real GDP growth is expected to be modest at 2.1% in 2024, with strong non-oil sector growth driven by tourism, despite a slowdown in hydrocarbon growth due to capacity constraints.
- Saudi Arabia: Following a contraction in 2023, Saudi Arabia’s real GDP is projected to grow by 2.5% in 2024, fueled primarily by robust private sector activities. A significant increase in oil production is anticipated by 2025.
- UAE: The UAE’s real GDP growth is forecasted to accelerate to 3.9% in 2024, spurred by increased oil production and strong performance in non-oil sectors such as tourism and real estate.
The economic landscape of the GCC region is evolving, marked by significant new investments that promise to enhance local growth. The interplay between government policies, investment in human capital, and diversification efforts will be pivotal in shaping the future of these economies. As GCC nations continue to adapt to global economic challenges, understanding these dynamics will be essential for fostering a competitive business environment.
