The economies of GCC countries are expected to regain aggregate growth of 2.2% this year after a 4.8% contraction in 2020 caused by the Covid-19 pandemic and falling oil prices, the World Bank said.
“With the recent progress made with the deployment of the Covid-19 vaccine around the world and with the resumption of production and trade around the world, the prospects for economic recovery are firmer now than at the end of last year. The Washington-based institution said in the latest issue of its Gulf Economic Update (GEU).
The United Arab Emirates, according to the report, is expected to resume growth in 2021, estimated at 1.2%, before accelerating to 2.5% in 2022 and 2023 thanks to government spending and the organization of the Expo 2020 in October 2021.
The report, titled “The Covid-19 Pandemic and the Path to Diversification,” says growth is supported by the global economic recovery, forecast at 5.6% and the recovery in global oil demand and international prices petrol.
The pandemic and the decline in global oil demand and prices inflicted on GCC countries a health crisis and shock in commodity markets causing GDP to contract 4.8% in 2020.
The International Monetary Fund said in its forecast that after contracting 4.8% in 2020, the Gulf states are on track to grow 2.7% in 2021, a 0.2% improvement from their October 2020 projection. In the North African region, real GDP growth is expected to reach 4.0 percent in 2021, supported by strong policy responses and a better-than-expected external environment, the IMF said.
The World Bank report said, however, that GCC budget deficits are expected to persist for the most part over the forecast period. The three countries with the largest deficits in 2020 – Kuwait, Bahrain and Oman – are expected to remain in deficit throughout 2021-2023, but at narrower ratios to GDP in 2023 than during the economic downturn of 2020.
According to the GEU, reductions in oil supply and the average oil price, the lowest in four years, of $ 41.30 per barrel, reduced the group’s exports of goods and services by 8.1% in real terms and transformed the current account surplus from 6.8% of GDP in 2019 to a deficit of 2.9% of GDP in 2020.
Non-oil GDP is proportionately larger today in all GCC countries than it was 10-20 years ago, but there is still a long way to go. Many still rely heavily on oil and gas exports, which account for over 70 percent of total merchandise exports to Kuwait, Qatar, Saudi Arabia and Oman, and on oil revenues, which exceed 70 percent of government revenue. total in Kuwait, Qatar, Oman and Bahrain.
“While the GCC did a lot last year to contain the effects of the pandemic on their economy, including getting vaccines early on, they must continue to reform their public finances,” said Issam Abousleiman, regional director from the World Bank. GCC countries. “The region needs to strengthen its competition policies to reap the benefits of telecommunications and the digitization of economic activity. “
According to the World Bank, Bahrain will continue to rely on fiscal support measures in 2021 to overcome the economic contraction in 2020. GDP growth is expected to reach 3.3% in 2021 and remain at the same pace over the medium term.
For Kuwait, oil exports will continue to drive growth momentum. Economic growth is expected to rebound to a moderate level of 2.4% in 2021, before accelerating to 3.2% on average in 2022-2023. Oman’s economy is expected to recover in 2021, but at a moderate growth rate of 2.5% as a major infrastructure investment program gathers momentum. Medium-term growth is expected to average 5.3% over the forecast period. Qatar is expected to post a strong rebound in growth, with LNG demand in South and East Asia supporting the medium-term outlook. Qatar’s economy is expected to grow 3.0% in 2021 before accelerating to 4.1% in 2022 and 4.5% in 2023.
For Saudi Arabia, the strengthening of global oil demand will support the economic recovery in 2021, with GDP growth expected to reach 2.4% in 2021. Medium-term growth is expected to average 3.0% over the course of the year. the forecast period.
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