The GDP of the Middle East is expected to increase by 5.2% this year, according to an analysis commissioned by the ICAEW and Oxford Economics. It has increased by 1% from the projection made by Oxford Economics three months ago. Middle East nations are responding positively to the challenges that are being posed by Ukraine and Russian war, the economic slowdown in China and the tightening of conditions in the global market, as per a report prepared for Q2.
Kavan Choksi–a business expert, speaks
A business and finance expert, Kavan Choksi, believes that the economic prognosis in the Middle East stays strong despite a deteriorating global picture as the market is facing a lot of pressure amid rising uncertainty.
The rise in oil prices and their impact on the macro-economic scenario
He believes that the surge in the oil prices in the region has provided a lot of support to the macroeconomic environment that is being deployed to eliminate the influence of the increasing inflation and disruptions on the supply chain of nations that import commodities in the region. He also believes that if a scenario may arise where most large economies go into recession would place pressure on the demand for oil and place the resilience of the GCC’s region to test.
Output is expected to rise
The prospects of GDP growth in Saudi Arabia have risen because of the rising prices of oil, with its output expected to increase by 7.1% in 2022, rising up from 4%. In the UAE, the reform initiatives of the government and the rise of output are projected to support the growth of 6.7% this year. Despite the increase in the volume of spending, the higher returns from hydrocarbons imply that all of the six GGC nations will have budget surpluses this year.
Economic bounce back from the COVID-19 Pandemic
The economy of the GCC has witnessed an impressive recovery from the disruptions triggered by the coronavirus pandemic and has remained steady amid global headwinds generated by market instability for a prolonged period of time.
Saudi Arabia has expressed its eagerness to help in reducing the oil prices increased in the region. This step is an indication that it is concerned about the repercussions of an impending recession in major economies. It is the oil sector’s growth that has been the key driver of prosperity in the region.
Growth in the non-oil sectors in the Middle East
According to business expert Kavan Choksi, the increasing prices of commodities and the growth of the non-oil sectors have an impact on the global economic market. Activities in the non-oil sectors persist in rising immensely across the GCC nations, with predictions provided by the ICAEW that it will climb to 4% from 3.4% three months ago.
The recent S&P Global Purchasing Manager’s Index or PMI research in Saudi Arabia and the UAE displayed signs of business and economic activity softening as international headwinds are taking a toll on their confidence in the market. However, despite these changes, these sectors stay firmly in the territory of expansion.
