GCC may continue to outperform many developed economies in GDP growth this year: Report

The GCC will likely continue to outperform many developed economies in terms of GDP growth this year although the region’s outlook for 2023 is more cautious given the weaker external environment, a report has shown.While oil and gas output growth is expected to slow this year, continued investment to boost production capacity in the GCC region should see the sector contribute positively to headline GDP again in 2023, Emirates NBD said in a report."We expect non-oil sector growth to slow to varying degrees across the GCC in 2023,” the report noted.Emirates NBD noted 2022 was a "stellar” year for the GCC economies, which have grown at the fastest pace in almost a decade, underpinned by a double-digit increase in oil production and strong non-oil sector activity as well."We estimate GCC real GDP growth at 7.4% in 2022 on a nominal-GDP weighted basis, more than double the growth rate achieved in 2021,” Emirates NBD noted.Non-oil sector growth in the region was also "robust” as domestic demand continued to rebound from the pandemic-related contractions in 2020, it said.Emirates NBD said its view on robust government investment spending in the region is predicated on its expectation that oil prices will remain elevated this year, with Brent forecast to average over $100 per barrel in 2023.While oil has started 2023 on the back foot over global recession fears, supply remains constrained in the context of years of underinvestment in infrastructure and capacity. International sanctions on Russian energy exports may also contribute to tighter oil supply.On the demand side, Emirates NBD noted China’s abrupt relaxation of the most stringent Covid zero restrictions could see activity there normalise earlier than previously anticipated, and demand for oil may well surprise on the upside in the second half (H2) of this year.