Economists believe that the GCC economies are all set to achieve higher and stronger economic growth in 2022 on the back of higher oil prices and the expansion of their non-oil sector. These two factors will primarily inject increased growth momentum in their economies through higher public financing and improved demand and employment generation.
Fiscal policy changes are playing a pivotal role in faster economic recovery in some countries through fiscal balancing and increased public financing and investments. VAT has been introduced in Saudi Arabia, Oman and Bahrain.
As per IMF forecast, the GCC as a whole will come back to a fiscal balance in 2023, for the first time since 2014. Oman has already reported the lowest budget deficit this year as a result of significant reforms besides higher oil prices.
Most of the sectors besides tourism, hospitality and transportation registered stronger recovery and were seen largely back to pre-covid level and in most of the countries. Saudi Arabia’s non-oil GDP also succeeded in exceeding its pre-pandemic level during last year. The financial services sector boomed across the region due to higher and easy liquidity and reduced risks of defaults due to government intervention.
Many GCC countries have been at the forefront to take rapid and timely mitigation measures against the covid 19 pandemic and UAE, Bahrain and Qatar are among the highest globally in rolling out of vaccines. Stringent government policies on mobility restrictions also supported the GCC nations in their fight against the virus to protect the economy.
Inflation is often a barrier to stronger economic growth prospects and though a major concern globally, does not appear to be too much of a concern for the GCC nations during 2022.
The UAE, Saudi Arabia and other countries in the GCC have also provided economic support through various initiatives and stimulus packages besides implementing strategic structural reforms and reducing budget deficits.
Emirates NBD, one of the leading banks in Dubai and UAE in its report said, “We expect this approach to continue in 2022. Saudi Arabia, the region’s largest economy, has pencilled in a 6 per cent decline in spending in the 2022 budget even as revenue projections were increased.”
“With Brent oil forecast to average just under $70 per barrel in 2022 and GCC oil production expected to rise, we expect Saudi Arabia, the UAE and Qatar to post budget surpluses this year, while Oman and Bahrain are likely to see their budget deficits narrow further,”
As per the Chief Economist of Emirates NBD, the Gulf economies are projected to grow 5.1% on average this year after recovering to 2.3% in 2021 from a 4.9% contraction during the previous year when the pandemic started.
“The recovery in the GCC economies gained momentum in the second half of 2021 as travel restrictions eased, tourism rebounded and domestic demand strengthened,” the report from Emirates NBD highlighted.
