GCC region’s GDP to grow over 5% in 2022, say economists

The Gulf Cooperation Council (GCC) will be one of the fastest regions to grow in 2022 at more than five per cent, provided the Omicron variant of coronavirus does not prove too disruptive, say economists.

Though regional recovery has lagged its peers over the last 12 months, 2021 has been a decent year, with GCC GDP expected to surpass pre-crisis levels in Q1 2022.

“We anticipate a strong recovery in economic output across the GCC in 2022, with GDP growing at 5.2 per cent, almost twice the pace this year. It is challenging to forecast the impact of Omicron, given limited knowledge about the variant, but it is clear that downside risks stemming from the pandemic will linger for the foreseeable future,” said Scott Livermore, chief economist for the Middle East at Oxford Economics.

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Oxford Economics analyst expects increase will be driven by the oil sector with output rising progressively unless Omicron hinders global demand. “We expect non-oil activity to continue to recover in 2022 following the almost complete lifting of health restrictions. High vaccine coverage and roll-out of boosters should limit the need for tighter control measures.”

Livermore said forecasts could be downgraded if the threat of Omicron to key sectors such as travel and tourism lingers.

“Oil sector performance will lead the rebound next year, rising by almost eight per cent, following a modest 0.6 per cent expansion in the last 12 months. The Opec+ group has stuck to its plan to steadily increase production quotas and, despite adopting a flexible approach to policy, it is unlikely to adjust this unless the Omicron variant dents demand to the extent that leads to a marked decline in oil prices,” said Livermore.

Oxford Economics sees Brent averaging $72.5 barrels a day in 2022, slightly above this year, but down to $68 by the end of 2022.

World Bank also said in a report that the GCC region is on the road to recovery in the medium term, aided by a recent bullish turn in energy markets which will ease fiscal pressures for the GCC countries and help to spur consumer confidence and investment.

“GCC countries are growing once again. GDP has gone from a decrease of 4.9 per cent in 2020 to an increase of 2.6 per cent in 2021 on the back of higher oil prices.”

Oil prices have more than doubled since October 2020, from $38 a barrel to $73.5 in December 2021.

The International Monetary Fund has also projected that real oil GDP growth is recovering on the heels of higher global oil demand and agreement at the July Opec+ meeting to gradually increase monthly oil production starting in August this year.

“As a result, real oil GDP for the region is expected to grow by 0.3 per cent in 2021 before increasing to 5.3 per cent in 2022. Overall real GDP growth for the GCC is projected at 2.5 per cent in 2021,” IMF said, projecting real GDP growth of 4.2 per cent in 2022 for the oil-producing Gulf region.

Scott Livermore of Oxford Economics said the non-oil sector recovery will continue in 2022, albeit at a slower pace of 3.3 per cent as against 3.8 per cent this year, lagging the energy sector for the first time since 2018.

He is upbeat on the UAE and Qatar as they’ll benefit from hosting international events Expo 2020 and World Cup while other countries will find it harder to boost recovery.

However, higher oil prices will facilitate some increase in spending, which, coupled with off-budget investment outlays in Oman, should help the non-oil sector recover from lengthy lockdowns, added Livermore.

-waheedabbas@khaleejtimes.com

• Dubai