The ongoing economic recovery of the gulf region is expected to increase next year as fiscal deficits narrow down and oil income climbs and the number of Covid-19 infections fall because of a wide-scale vaccination programme, as reported by the Institute of International Finance. Growth in the regional countries is forecast to grow 1.7 percent this year and 4.2 percent in 2022.
Samuel LaRussa, IIF’s senior research analyst told the media, “Hydrocarbon real GDP growth is projected at 5 percent in 2022 on the assumption that the OPEC+ production cuts end by mid-2022. Risks are broadly balanced. On the upside, faster vaccination rates and further progress in reforms could boost non-hydrocarbon growth in 2022.”
Economies in GCC are also bouncing back from the Covid-19 pandemic that posed challenges to the monetary and fiscal support provided to minimise the damages of the pandemic. Similar to almost all over the world, the health crisis has severely disrupted the economy last year and tipped the global economy into its worst recessions since the 1930s.
But, wide-scale vaccination and a drop in the number of Covid-19 cases across the region has also helped boost the confidence of investors, thereby accelerating the recovery of businesses in the private sector. Regional economies also stand to gain from rising oil prices after OPEC+ reached a deal in July on new production caps.
The IIF expects that central banks in the Gulf states will most likely leave their policies unchanged at least till the end of 2022. The IIF also added that non-resident capital inflows will rise from $123 billion in 2020 to $148 billion in 2021. All the GCC states have raised a combined $95 billion in the international market so far.