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.