The Middle Eastern economy is expected to slow down 0.6 percent in 2019, an improvement over the estimated 1.5 percent slowdown in 2018, and the smallest contraction in nearly a decade, according to a new report from the Institute of Chartered Accountants in England and Wales (ICAEW) and Oxford Economics.
The report, titled Economic Insight: Middle East Q2 2019, states the growth forecast slowdown is primarily because of a deeper-than-expected recession in Iran, whose economy is expected to contract seven percent in 2019. GCC countries will be challenged by lower oil prices, especially in countries that heavily rely on hydrocarbon receipts to balance their budget.
According to the report, oil output cuts expected to be announced by OPEC+ will limit the growth of the oil sector, which has traditionally been the primary driver of government revenue and economic growth.
However, the non-oil sector in the GCC is looking significantly more positive. The plans of the Gulf States – especially Saudi Arabia and UAE – to expand the non-oil sector through a variety of initiatives will fuel 2.6 percent growth in 2019, up from 2.3 percent in 2018.
“The outlook for Middle Eastern economies remains challenging for the rest of 2019, as global developments continue to be of crucial importance to the region. Growth prospects for the Middle Eastern economy have deteriorated as geopolitical risks, involving Iran especially, have risen in the last year,” said Michael Armstrong, FCA and ICAEW regional director for the Middle East, Africa and South Asia (MEASA).
“Continued uncertainty in the global oil market means increasing non-oil revenues is vital for regional economies – governments in the region have been proactive, but they must continue to support their economies with pro-growth initiatives.”