The economic outlook for the Gulf Cooperation Council (GCC) countries remains positive as governments are taking the lead to boost economic growth and improve consumer and investor sentiments despite challenging times, according to Dr Hussain Abusaaq, chief economist and head of research at KPMG in Saudi Arabia.
Growth in the GCC recovered to 2.2% in 2018 but is expected at 2% in 2019 after economies began slowing down as a result of their commitment to the recent organisation of the Petroleum Exporting Countries (OPEC) production-cut agreement, according to an article written by Dr Abusaaq that is published in Zawya.
Expansionary fiscal policy will continue to drive non-oil growth, which has picked up modestly from 2.5% in 2018 to 3.2% this year after a contraction of 0.4% in 2017, as stated by many international institutions.
However, global trade tensions are likely to hamper GCC growth indirectly. The region may be impacted secondarily due to the possibility of a fall in global crude oil prices, a slowdown in trade and the logistics industries, tariffs on aluminium, and an outflow of capital. That said, the strong economic foundations of GCC economies are expected to absorb the shocks of a global trade war.
Tighter monetary policy has had a negative effect on the GCC region by constraining the expansion plans of the governments, increasing borrowing costs, and weakening private sector growth. However, given the US Federal Reserve’s shift toward a slower pace of rate hikes, borrowing costs are likely to stay lower for longer this year, leading to a boost in the region’s growth.