Arab News, Thu, May 30, 2024 | Dhu al-Qadah 22, 1445
Saudi Arabia’s real GDP to grow by 2.5% in 2024 driven by non-oil activities: World Bank
Saudi Arabia:
Saudi Arabia’s real gross domestic product is expected to grow by 2.5 percent in
2024, driven primarily by robust non-oil private activities, which are predicted
to grow by 4.8 percent.
Similarly, economic growth in the Gulf Cooperation
Council region is projected to rebound to 2.8 percent and 4.7 percent in 2024
and 2025, respectively, according to the Spring 2024 Gulf Economic Update issued
by the World Bank.
With oil production quotas expected to be
gradually lifted during the second half of 2024, oil GDP in the GCC is projected
to grow by 1.7 percent this year before ramping up aggressively in 2025 to reach
6.9 percent.
Meanwhile, non-oil GDP in the GCC should remain
robust and expand by 3.6 percent in 2024 and 3.5 percent in the medium term,
supported by accommodative fiscal policy, lower interest rates,
and strong private consumption and investment.
Talking to Arab News, Safaa El-Tayeb El-Kogali,
World Bank’s country director for GCC, said the growth was further driven by
region-wide efforts to steer economies away from oil.
“I have to point out here that really the efforts
to reform the economy and diversify it in all the countries of the GCC are
reflected in the robust growth of the non-oil economy, which is expected to be
3.5 percent in 2024 and 3.6 percent in 2025,” the top executive said.
However, she outlined that he GCC region
experienced an economic slowdown in 2023, growing at an annual rate of 0.7
percent, after registering a stellar growth of 7.6 percent in 2022.
While the growth in 2022 was supported by a boom
in commodity prices, increased oil production, and strong non-hydrocarbon
activities, the deceleration in 2023 was primarily due to cuts in oil
production, which contracted by 5 percent, in line with tighter quotas
introduced by the Organization of the Petroleum Exporting Countries and its
allies, known as OPEC+, to stabilize oil prices, she added.
Thus, the overall oil GDP in the region is
expected to register a contraction of 0.8 percent in 2024, according to the
World Bank report, however, these trends are expected to be reversed in 2025,
with oil output anticipated to ramp up aggressively resulting in 5.9 percent
overall GDP growth.
According to the official, this was further
exacerbated by tightening global monetary conditions and geopolitical
developments, the “conflict in the Middle East” and the ramifications of
shipping disruptions in the Red Sea.
Further escalation of the war on Gaza could have
adverse economic implications and spillover effects on the region, thus
increasing uncertainty and dampening investor confidence, reduce tourism, cause
capital outflows and financial market instability, weigh on investment growth,
and subsequently weaken prospects for output and productivity growth, the report
stated.
The World Bank official said: “In the context of
expected slower global growth in 2024 for the third consecutive year, oil prices
will continue to play an integral part in defining the growth prospects for the
GCC region. Despite ongoing OPEC+ production cuts, average oil prices for 2024
are expected to remain flat compared to 2023, with a further decline anticipated
in 2025.”
She added: “Despite the cautious oil production
levels implemented by OPEC+ members, oil prices are expected to remain nearly
unchanged in 2024 (at $80 per barrel) and further decline to $76 per barrel in
2025. Several factors present large uncertainties to energy market outlook,
notably the geopolitical tensions recently exacerbated by the military attacks
between Iran and Israel and the ongoing disruptions of commercial shipping
routes in the Red Sea. Any further escalation in regional conflicts could
disrupt energy supplies, leading to a spike in energy prices.”
According to the official, other factors include
the recent strikes on Russian energy infrastructure, the degree of compliance by
OPEC+ countries to production quotas, and the prospects of global economic
growth and the ensuing volatility in world oil consumption and demand.
Additionally, weaker-than-projected growth in
China could cause a sharper than expected deceleration in global economic
activity, she further explained.