WB: GCC Economies to See Growth as OPEC+ Cuts Phase Out

GCC economies are likely to achieve an aggregate growth rate of 2.6% in 2021, according to the World Bank GCC Economic Update issued on Thursday. The report, titled “Seizing the Opportunity for a Sustainable Recovery”, attributed the rebound to stronger oil prices and the growth of non-oil sectors. It predicted the trend is likely to continue into 2022 as “OPEC+ mandated oil production cuts are phased out and higher oil prices improve business sentiment and attract additional investment.”

It added that the outlook in the medium term is subject to risks from slower global recovery, renewed coronavirus outbreaks, and oil sector volatility. The report also identified large wage bills as a threat to the GCC economies. “With high population growth and limited options in the private sector, the wage bill has become unsustainable in some GCC countries, as it is a large part of government spending and of the economy overall,” said Issam Abousleiman, World Bank’s regional director for the GCC.

The average GCC wage bill has surpassed the Organization for Economic Co-operation and Development’s average over the past two decades, except in Qatar and the UAE, the report showed. In the Kingdom, allowances for civil servants rose to SR148 billion (US$39.5 billion) in 2019 from SR44 billion (US$11.7 billion) in 2016, forming more than a third of the Kingdom’s total wage bill. Also, salaries and benefits allocation in Kuwait’s 2022 budget amounted to 55 % of its total expenditure, while Oman’s wage bill has doubled in the past decade.