GCC Economies to Slow in 2023 on Sluggish Oil Demand

Economies in the six-member GCC will grow this year at half the rate of 2022 as oil revenues take a hit from an expected mild global slowdown, according to the median view from a Reuters poll of economists.

Crude oil prices, a major driver for GCC economies, are down more than a third from last year's highs and were expected to remain under pressure this year over fears of a recession in major economies sapping demand.

Overall growth in the six GCC economies was forecast to average 3.3% and 2.8% this year and next respectively, the Jan. 9-23 poll showed, down from 4.2% and 3.3% in the previous poll.

"The outlook for 2023 is more cautious given the weaker external environment, although the GCC will likely continue to outperform many developed economies in terms of GDP growth," wrote Khatija Haque, head of research and chief economist at Emirates NBD.

"While oil and gas output growth is expected to slow this year, continued investment to boost production capacity in the region should see the sector contribute positively to headline GDP again in 2023."

Brent crude is expected to average US$89.37 a barrel in 2023, nearly 4.6% lower than the US$93.65 consensus in a November survey and lower than an average of US$99 per barrel seen last year, a separate Reuters poll showed.

Saudi Arabia, the region's largest economy and top crude oil exporter, was forecast to grow 3.4% this year and 3.1% in 2024, slightly outperforming the region as a whole. The economy expanded at a record pace of 8.8% in 2022.

Economic growth in the UAE was expected at 3.3% this year, down from 6.4% last year. Among other GCC countries — Qatar, Oman, and Bahrain — growth was expected at 2.4% - 2.7% for 2023. Kuwait was seen growing at 1.7%.

Despite lower oil GDP growth, non-oil growth was expected to remain resilient in 2023, economists in the survey said. Analysts expected continued current account surpluses for the main GCC economies, based on relatively high oil prices.

Saudi Arabia, the UAE, Qatar and Kuwait were predicted to see double-digit growth in current account surpluses in 2023, with Oman and Bahrain in single digits. The inflation outlook was modest, but varied, with the lowest in Oman at 1.9% and the highest at 3.1% in the UAE.