The World Bank has lowered its GDP growth forecast for the Gulf Cooperation Council due to slower oil price recovery and production cuts linked to the OPEC agreement.
The organisation forecast in its October report that growth in the region would average 0.7 per cent in 2017, from 1.3 per cent previously.
Performance is then forecast to improve in the next two years, with regional growth expected to average 1.9 per cent in 2018, followed by 2.7 per cent in 2019. However this is still short of levels seen before the oil price drop in 2014 and the average of 4.5 per cent seen before 2011, it said.
This year, Bahrain is expected so see the most GDP growth in the region at 2.4 per cent, followed by Qatar at 2.0 per cent, the UAE at 1.4 per cent, Saudi Arabia at 0.3 per cent, Oman at 0.1 per cent and Kuwait at -1 per cent.
“Lower-than-expected oil prices, limited crude production, and widespread geopolitical risks will lead the economy to slow down this year,” the World Bank said of Saudi Arabia.
The other Gulf countries were described as being similarly impacted by lower oil prices, with Qatar also feeling the effects of its isolation from its neighbours as part of a boycott by Saudi Arabia, Bahrain and the UAE.
Kuwait’s forecasted economic decline was due to its dependence on oil for nearly half of its GDP.
Next year, Oman is expected to see the most growth in the region at 3.4 per cent, followed by the UAE at 3.1 per cent, Bahrain at 2.0 per cent, Kuwait at 1.9 per cent, Qatar at 1.7 per cent and Saudi Arabia at 1.2 per cent.
In 2019, Kuwait will then lead the region at 3.5 per cent growth, followed by the UAE at 3.3 per cent, Qatar at 3.0 per cent, Oman at 2.9 per cent, Saudi at 2.1 per cent and Bahrain at 1.6 per cent, according to the forecast.
The World Bank said challenges remained related to debt issuance volumes across the GCC, with Moody’s estimating the debt-to-GDP ratio across the region would rise from 10.5 per cent in 2014 to 31.6 per cent by 2018.
OPEC and non-OPEC producers have yet to decide whether they will extend an output cut of around 1.8 million barrel per day that is due to expire in March next year.
Russian President Vladimir Putin said last week the deal could be extended until the end of 2018 to help balance the market.