The economy is set to grow at a 3.4% clip this calendar year, slowing down from the 6.6% growth seen in 2022, according to the World Bank’s latest Gulf Economic Update (pdf), out last week. The report sees oil GDP growing 0.7%, while non-oil GDP is expected to grow 4.5%.

The rationale: Non-oil GDP growth is expected to be buoyed by “strong performance in tourism, real estate, construction, transportation, and manufacturing and a surge in capital expenditure,” the World Bank says. Overall GDP is weighed down by “weaker global activity, stagnant oil output, and tighter financial conditions.”

Growth will pick up again next year: The World Bank expects the economy to grow 3.7% next year, rising 0.3 percentage points from the current calendar year, albeit remaining below 2022’s GDP growth rate.

Our fiscal sustainability is on track: “The implementation of fiscal revenue reforms such as the introduction of Corporate Income Tax (CIT), and maintaining prudent and well-coordinated emirate-specific fiscal anchors and rules, should improve fiscal buffers and overall fiscal sustainability,” the World Bank said. While the government has maintained a fiscal surplus, this surplus is “narrowing to reflect softening oil prices and lower oil production levels.”

SLOWER REGIONAL GROWTH-

The GCC economy as a while is shifting to a lower gear this year, with the economy expected to contract 1% y-o-y before growing 3.6% in 2024 and 3.7% in 2025. Still, the region’s private sector will grow at a 3.9% clip this year.

Israel’s war in Gaza provides downside risk: “The current conflict in the Middle East poses significant risks to the region and the GCC outlook, especially if it extends or involves other regional players. As a result, global oil markets are already witnessing higher volatility,” said World Bank Country Director for the GCC Safaa El Kogali.

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