Saudi Arabia’s Growth Stalled by Lower Oil Output: Economists

Saudi Arabia’s economic growth is expected to be one of the slowest among the Gulf Cooperation Council (GCC) countries this year, according to a recent Reuters poll of economists. This sluggish growth is primarily attributed to extended oil output cuts, prompting economists to lower their forecasts. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, have extended their production cuts until well into 2025.

Despite the war in the Middle East, oil prices have struggled to maintain levels above $80 per barrel, leading the International Monetary Fund (IMF) to lower its growth forecast for Saudi Arabia. This downward trend in oil prices has had a direct impact on Saudi Arabia’s economy, as oil revenues constitute a significant portion of the country’s income. The Reuters poll revealed a projected economic expansion of 1.3% for Saudi Arabia in 2023, a significant decline from the 1.9% forecast in April. This downward revision highlights the negative impact of lower oil revenues on non-oil sector growth.

Reduced oil revenues have impacted investments in non-oil sectors, affecting overall expansion. However, economists anticipate a recovery in 2025 with a projected growth rate of 4.5%, driven by anticipated increases in oil production.

The United Arab Emirates (UAE) is expected to outperform Saudi Arabia this year, with projected growth of 3.7%, fueled by increased oil production and a thriving tourism sector. The UAE’s focus on diversifying its economy has positioned it for stronger growth compared to its neighbors.

While Kuwait is expected to remain in a recession, other GCC countries such as Qatar, Oman, and Bahrain are projected to experience modest growth. These economies are also facing challenges due to lower oil prices, but their economic diversification efforts are expected to contribute to a gradual recovery.

Despite global inflationary pressures, inflation across the GCC is anticipated to remain subdued, with forecasts ranging from 1.0% to 3.0% in 2024. This suggests that the region is relatively insulated from the global inflationary pressures seen in other parts of the world.