Optimism in non-oil sector boosts GCC economies: Analysts

The GCC economies continue to deliver strong performance despite global challenges, supported by economic reforms and developmental initiatives, several analysts told Argaam.

The oil sector is facing some pressures due to the possibility of OPEC+ extending the production cuts, which might affect the gross domestic product (GDP) growth.

In contrast, the non-oil sectors continue to achieve notable growth, with forecasts that the UAE’s non-oil GDP will grow by around 5%. Saudi Arabia, too, experienced significant acceleration in this sector over the past year.

The financial stability in the GCC countries enhances their ability to weather volatility. Public debt levels will remain low relative to GDP, while the governments will continue to implement their development programs backed by financial surpluses and strategic investments.

Analysts expect oil prices to range between $70 and $75 per barrel in the coming period, amid risks that could push prices higher, such as geopolitical tensions or production policies in the US.

Merza Hassan: Need to stay competitive, confront dumping

The GCC economies demonstrated resilience in facing challenges, said Merza Hassan, Senior Advisor to the Chairman of the Arab Fund for Economic and Social Development. The economic reforms implemented in the recent years helped strengthen the region’s ability to withstand crises, he added.

Competitiveness represents a significant challenge for the GCC countries, especially with increased production in East Asia and the potential market dumping practices. Therefore, the GCC countries should focus on enhancing their competitive capabilities to ensure sustainable growth, particularly given the possibility of Asian production surpluses being exported to GCC markets at low prices.

Global markets and geopolitical changes might affect the oil sector, said Hassan, indicating that the GCC economies have shown an ability to absorb shocks, including regional conflicts and price fluctuations.

US interest rates could exert pressure on the global economy, which may adversely affect some sectors in the GCC, such as real estate and public debt.

Hassan warned that the continuation of the trade war between major economic powers could increase global inflation rates, indirectly affecting GCC economies.

Scott Livermore: Challenges in oil sector, growth prospects positive

For his part, Scott Livermore, Chief Economist at Oxford Economics Middle East, expressed optimism about the growth prospects in the GCC countries, expecting the region to remain among the best-performing economies in the world.

The potential cuts in oil production might impact GDP growth rates, but non-oil sectors continue to grow robustly, with Saudi Arabia experiencing accelerated growth in its non-oil GDP last year, while this sector in the UAE is expected to grow by around 5%.

The financial positions of the GCC countries remain strong despite pressures, with public debt levels in most GCC states staying below 40% of GDP, thereby providing them with greater capacity to continue executing their development plans.

Oil prices could experience a decline over the year, with expectations to drop below $75 per barrel due to global market pressures. Livermore did not rule out risks that could drive prices higher, such as geopolitical tensions or US intervention in Iranian oil exports.

Inflation in the GCC remains moderate compared to other markets, though rising real estate prices in major cities like Riyadh and Dubai could impose limited inflationary pressures.

Finally, Livermore ruled out the possibility of an economic recession in the region, expecting continued positive performance throughout the current year despite the challenges facing the global oil markets.