Middle East Economics_ GCC_ Balancing Oil Production Cuts and Diversification

Summary of GCC Economic Outlook Industry Overview - The report focuses on the Gulf Cooperation Council (GCC) region, analyzing economic growth projections amid a challenging oil market and geopolitical risks [1][7][64]. Key Economic Projections - GCC Economic Growth: Projected to accelerate to 3.2% in 2025 from an estimated 1.4% in 2024 [1][7]. - Oil GDP Growth: Expected to grow by 1.5% in 2025, following a 3.2% contraction in the previous year [8]. - Non-Hydrocarbon GDP Growth: Anticipated to be 4.0% in 2025, slightly lower than the 4.4% projected for 2024 [8]. Country-Specific Insights - Saudi Arabia: Economic growth expected to expand by 3.2% in 2025, with oil production averaging 9.0 million barrels per day (mb/d). Non-hydrocarbon activity projected to grow at 4.4% [15]. - United Arab Emirates (UAE): Growth set to accelerate to 4.2% in 2025 from 3.7% in 2024, with oil production increasing to 3.54 mb/d [21]. - Qatar: Projected growth of 2.8% in 2025, supported by a 1.5% rise in oil activity and a 3.5% growth in the non-oil sector [31]. - Kuwait: GDP growth expected at 1.5% after a 2% contraction in 2024, with a focus on necessary fiscal and structural reforms [37]. - Oman: Economic growth projected to accelerate to 2.3% in 2025, driven by a 1.1% growth in hydrocarbon GDP [46]. - Bahrain: Expected growth of 2.7% in 2025, with non-oil GDP growth projected at 3.0% [55]. Risks and Challenges - Geopolitical Risks: Elevated geopolitical risks and uncertainties surrounding oil production trajectories pose significant challenges [1][64]. - Oil Price Dependency: GCC countries remain highly exposed to oil price fluctuations, which could impact their economic diversification efforts [64]. - Budget Deficits: The aggregate budget deficit for the region (excluding the UAE) is expected to widen to 5.5% of GDP in 2025 from 2.5% in 2024 [8]. Policy Recommendations - Emphasis on economic diversification away from oil dependency is crucial for long-term sustainability [65]. - Strengthening governance reforms is essential to enhance the effectiveness of economic diversification efforts [66]. Conclusion - The GCC region is navigating a complex economic landscape with a cautious outlook for 2025, driven by both opportunities in non-oil sectors and challenges related to oil price volatility and geopolitical tensions [64][65].