Economic Analysis - Growth To Bottom In 2017 - NOV 2017

BMI View: Economic growth in the GCC will strengthen from 2018 onwards, as the factors that have weighed on expansion this year - namely hydrocarbon production cuts and lower-for-longer oil prices - will ease, boosting government revenues and improving consumer and investor confidence across the region. Qatar and the UAE will be the growth outperformers over the next five years.

We expect economic growth to pick up in all Gulf Cooperation Council (GCC) member states over the medium term (2018-2021) as rising hydrocarbon prices boost government revenues and consumer and business confidence across the region, and easing curbs on oil production boosts exports. We forecast an annual aggregate average of 2.8% real GDP expansion over the period - a recovery from the 1.5% we forecast in 2017. Growth will underperform this year (from an average 2.5% in 2016) - owing to the OPEC, non-OPEC agreement to curb oil production, and lower oil prices than we initially anticipated. The UAE and Qatar will outperform the region over the years ahead, as strong fiscal positions enable their governments to invest heavily into diversification and infrastructure development programmes. While Bahraini growth rates are likely to also remain robust, we note that the country is exceptionally vulnerable to external shocks, given its wide budget deficits, high debt and reliance on Gulf funding.

Higher Hydrocarbon Prices Will Boost Consumption And Investment

Growth To See Only Gradual Acceleration
GCC - Real GDP Growth, % chg y-o-y
Note: 2016 = BMI estimate; 2017-2021 = BMI forecast. Source: National sources, BMI

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