Non-energy sector to power Gulf GDP growth in 2024: ICAEW

The Gulf Co-operation Council's (GCC) non-energy sectors are set to drive GDP (gross domestic product) growth in 2024 and the GCC inflation is slated to be around 2.5%, higher than pre-pandemic levels, according to (ICAEW), the Institute of Chartered Accountants of England and Wales (ICAEW).
The latest Economic Insight report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, said the region is expected to defy the global slowdown in 2024 as the non-energy sectors continue to drive growth.
The pace of the Middle East’s GDP growth is predicted to rise to 3.2% next year, above the global GDP growth forecast of 2.1%.
According to the Q4 (fourth quarter) report, the Middle East economy will expand less than initially expected this year, with GDP growth expected at 1.3%. However, growth will improve in 2024 and outpace most advanced and emerging economies.
Projections for the GCC growth this year have been scaled back to 0.7% on large negative contribution from the energy sector amid ongoing curbs in oil production, it said.
Highlighting that there are "promising signs" within the non-energy sectors, notably in Saudi Arabia and the UAE; the report said "the GCC's growth is expected to rise to 3.9% next year, primarily propelled by these industries."
“The economic outlook this quarter has been significantly hampered by oil output cuts. We now expect GCC oil output to shrink by nearly 5% this year, which makes it the weakest performance since 2009, excluding 2020. However, despite oil production and prices, there remains positive momentum in the non-energy sectors and an overall investment drive across the region to support this growth,” Hanadi Khalife, Head of Middle East, ICAEW, said.
The resurgence in travel and tourism across the region has been notably robust, surpassing the pre-pandemic levels in nearly every GCC country, it said, adding Saudi Arabia’s tourism industry continues to thrive, welcoming 27.6mn overnight tourists this year.
"This is expected to increase further, with a projected 30mn tourists by 2024 and more than 50mn by 2032," the report said, adding the government recently revised its 2030 visitor target to 150mn (both domestic and international), up from the previous 100mn, aiming for the tourism sector to contribute 6% of GDP in the current year and 10% by 2030.
The introduction of a unified GCC tourist visa, expected to take effect in 2024 or 2025, will likely further amplify visitor arrivals to the region, according to ICAEW.
Scott Livermore, ICAEW economic advisor, and chief economist and managing Director, Oxford Economics Middle East, said the global economic backdrop is weakening as the world enters 2024, with most major economies poised for a significant slowdown.
"However, there are indicators of optimism for the region. We have seen better than expected recovery in the travel and tourism sector which will continue to drive GDP expansion next year, outpacing global growth forecasts,” he said.
The report highlights that the GCC inflation is expected to be around 2.5%, mirroring the average rate expected across advanced economies of 2.4% next year and higher than pre-pandemic levels.
Food, housing and services will continue to drive upward inflationary pressures, it added.
"Despite the relatively benign inflation outlook, most GCC central banks will reflect moves dictated by the Federal Reserve, consistent with the currency pegs to the US dollar. This alignment could result in an extended period of higher interest rates, coming down towards the end of 2024," it said.