GCC markets are expected to show robust economic growth over the medium term due to economic diversification of their local economies, according to an Ernst and Young (EY) forecast.
Qatar is expected to show the strongest medium-term growth at six per cent followed by Saudi Arabia and the UAE, which are slated to grow by 4.3 per cent and 3.9 per cent respectively.
“In the key Middle Eastern rapid growth markets, a young population is helping to foster entrepreneurship and the growth of the non-oil sector is buoyant, protecting these economies from slower global oil demand,” said Bassam Hage, MENA markets leader, EY.
Hage also said that the development of international trade flows and an expanding middle class are expected to fuel future growth in the region.
GDP growth in the UAE is predicted to reach 4.1 per cent in 2015, up from 3.3 per cent in 2012. The report attributed the growth to recovery of key sectors like financial services and construction.
With a strong focus on economic diversification and an accommodative fiscal policy, the UAE has several infrastructure projects planned in Dubai and Abu Dhabi, said the report.
Among other GCC markets, GDP growth in Saudi Arabia is forecast to slow down from 6.8 per cent in 2012 to 4.3 per cent in 2013 and 4.6 per cent in 2014. The fall in the GDP was attributed to reduced oil production in 2013, the report said.
Despite sluggish growth in the oil sector, the Kingdom’s non-oil growth will remain robust during the next few years, according to EY.
Strong growth in consumer spending, a rise in retail lending and a falling unemployment rate, particularly among males will contribute to non-oil sector growth. Meanwhile, fiscal policy will remain supportive, with government spending forecast to rise by an average of 7.4 per cent per annum across 2014 to 2016.
“As the leading rapid growth market economies mature, their economies will gradually rebalance,” said Hage.
“Growth will be moderate, and driven increasingly by production and services targeting domestic consumers.”
He said that such a trend could be observed in Saudi Arabia where a manufacturing sector targeting the needs of a rich population is gradually developing in a bid to diversify from its reliance on oil revenues.
However GDP across the MENA region is expected to grow by three per cent, down from 3.7 per cent in 2012. The fall in GDP can be attributed to lower commodity prices and reduced demand for Middle Eastern exports, said the report.