In detail: GCC economic growth expected to slow to 2.5% in 2023: World Bank

Muscat: The economies of the Gulf Cooperation Council (GCC) are projected to grow at a slower pace in 2023 compared to the previous year, in the face of lower oil and gas earnings and a global economic slowdown, according to the new World Bank Gulf Economic Update (GEU). The GCC is expected to grow by 2.5 percent in 2023 and 3.2 percent in 2024. This compares to the region’s remarkable GDP growth of 7.3 percent in 2022, which was fueled by a strong increase in oil production for most of that year.

Economic growth in Kuwait is expected to slow to 1.3 percent in 2023 in response to a more cautious OPEC+ production approach and sluggish global economic activity. Kuwait’s non-oil sectors are anticipated to grow by 4.4 percent in 2023 driven primarily by private consumption.

The weaker performance in the GCC is driven primarily by lower hydrocarbon GDP, which is expected to contract by 1.3 percent in 2023 after the OPEC+ April 2023 production cut announcement and the global economic slowdown. However, robust growth in the non-oil sectors, which is anticipated to reach 4.6 percent in 2023, will dampen the shortfall in hydrocarbon activities, driven primarily by private consumption, fixed investments, and looser fiscal policy in response to 2023’s relatively high oil revenues.

The latest issue of the World Bank’s GEU states that this year’s more modest growth is nonetheless buoyed by the structural reforms undertaken in the past few years. Improvement to the business climate and competitiveness, and the overall improvements in female labor force participation in the GCC countries, especially in Saudi Arabia, have all paid off, though further diversification efforts are still needed and is underway, the report said.

This issue of the GEU, titled “The Health and Economic Burden of Non-Communicable Diseases in the GCC” focuses on how non-communicable diseases (NCDs) have become the leading cause of mortality and morbidity, accounting for close to 75 percent of all deaths and disability in the region. Of these deaths and disability, more than 80 percent are attributed to just four main NCD categories: cardiovascular diseases, diabetes, cancer, and respiratory diseases.

The report also highlights the substantial cost of NCDs to the economies of the GCC countries. A recent study published in the Journal of Medical Economics, a collaborative effort between experts at the World Bank and key stakeholders from across the GCC, estimated the direct medical costs of seven major NCDs to be around $16.7 billion in 2019 alone. The same study found that NCDs also impose substantial indirect costs to their economies, through the adverse impact on human capital. The losses to workforce productivity alone cost the GCC economies more than $ 80 billion in 2019. With an aging population, and with it the prevalence of NCDs, these costs are only expected to grow in the future.

“Many of the GCC countries have already taken impressive steps to address such risk factors, including taxing tobacco products and sugary drinks, restricting or banning the advertisement, promotion or sponsorship of tobacco, and reducing the amount of salt through reformulation. Several GCC countries have also set themselves important environmental targets. There is an opportunity to do much more to minimize NCDs and their costs in the future,” said Issam Abousleiman, World Bank Regional Director for the GCC.

The report emphasizes that to effectively address the health and economic burden of NCDs requires a whole of government approach, a strategic focus on prevention, the targeting of the young and adolescents, and the development and implementation of evidence informed and contextually relevant multi sectoral interventions. Government agencies need to work together now to minimize the future threat of NCDs.

GCC country outlooks Bahrain: Bahrain’s economic outlook hangs on oil market prospects and the results of the accelerated implementation of its structural reforms’ agenda under the revised Fiscal Balance Program. Growth is projected to moderate to 2.7 percent in 2023 before averaging 3.2 percent during 2024-25 as fiscal adjustments continue. Growth in the hydrocarbon sector is expected to contract by 0.5 percent in 2023 while the non-hydrocarbon sectors will continue expanding by 3.5 percent supported by the recovery in the tourism and service sectors and the continuation of infrastructure projects.

Kuwait: Economic growth is expected to slow to 1.3 percent in 2023 in response to a more cautious OPEC+ production approach and sluggish global economic activity. The Oil sector is anticipated to contract by 2.2 percent in 2023 despite the newly established Al-Zour refinery. Kuwait’s non-oil sectors are anticipated to grow by 4.4 percent in 2023 driven primarily by private consumption. Policy uncertainty caused by political deadlock is expected to undermine the implementation of new infrastructure projects.

Oman: Oman’s economy is forecast to continue to grow, but at a slower pace, driven primarily by accelerated implementation of structural reforms under Vision 2040. Overall growth is projected to moderate to 1.5 percent in 2023 reflecting softening global demand. Accordingly, the hydrocarbon sector is anticipated to contract by 3.3 percent reflecting OPEC+ recent production cuts while the non-oil economy is projected to continue its recovery trajectory by growing 3.1 percent in 2023 supported by frontloading of infrastructure projects, increased industrial capacity from renewable energy, and the tourism sector.

Qatar: Real GDP is estimated to slow down to 3.3 percent in 2023 after the strong performance registered in 2022, with the hydrocarbon sector expanding by 0.8 percent. The North Field expansion project is expected to boost the hydrocarbon sector in the medium term once the field enters commercial operation. Meanwhile, robust growth is anticipated during this year in the non-hydrocarbon sectors, reaching 4.3 percent, driven by private and public consumption.

Saudi Arabia: Following a stellar GDP expansion of 8.7 percent in 2022, economic growth is projected to decelerate to 2.2 percent in 2023. A fall in oil production – as Saudi Arabia abides by OPEC+ agreed production cuts – will contract oil sector GDP by 2 percent. However, with oil prices remaining at relatively high levels, loose fiscal policy and robust private credit growth are expected to cushion the contraction in the oil sector. As a result, non-oil sectors are anticipated to grow by 4.7 percent in 2023.

United Arab Emirates: Economic growth in 2023 is expected to slow compared to 2022 due to a decline in global economic activity, contraction in oil production, and tightening financial conditions. Accordingly, real GDP is projected to grow by 2.8 percent in 2023 to reflect a decline in oil activity growth of 2.5 percent while a strong non-oil sector growth of 4.8 percent will soften the contraction in oil activities, driven by robust domestic demand, particularly in the tourism, real estate, construction, transportation, and manufacturing sectors.

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