The non-oil sector in GCC states will perform better in 2018 as the global economy is gaining strength, according to Mr Jihad Azour, Director of the Middle East and Central Asia Department of the Washington-based International Monetary Fund (IMF).
“Overall growth in the GCC is projected to bottom out at about 0.5% in 2017, whereas its non-oil growth is expected to pick up to about 2.6% in 2018 as the global economy recovers to 3.7% next year, driven by China, the US, Europe and many emerging markets,” he told reporters on the sidelines of a conference last December.
However, growth in GCC would be still not enough to significantly reduce the 12% unemployment rate, he added.
According to the IMF, oil and gas account for about 75% of the total GCC government revenue and represent 65% of its total exports.
Mr Azour also said the IMF expects oil prices to continue to trade at US$55-60 per barrel in 2018.
“Saudi Arabia and the UAE are in an advantageous position as they have sufficient financial buffers, hence they can lengthen their fiscal reforms,” he said, pointing to their moves to slash subsidies for water, electricity and petrol in the wake of the slump in energy prices since mid-2014.
Separately, UBS Wealth Management said in a report that GDP growth for the GCC is expected to rebound to 2.3% this year as countries adjust to a “new normal” of lower oil prices and benefit from a resurgent global economy.
“GCC countries are still adjusting to the new economic reality of lower oil prices, despite the recent recovery, while reform plans across the region are balancing the need for a more broad-based, diversified economy with respect for local traditions,” said Mr Ali Janoudi, Head of Wealth Management for Central and Eastern Europe, Middle East and Africa, France and Benelux International at UBS Wealth Management. “We think the progress achieved so far brightens the region’s outlook.”
Oil prices have recovered since last June and are hovering at around $60 per barrel, but they are expected to trend sideways this year. Further reforms are needed to diversify GCC economies and attract foreign investment, UBS said. M