Qatar’s GDP growth projection for this year stands at 2.2% and is expected to rise to 2.9% in 2025, the Institute of Chartered Accountants in England and Wales (ICAEW) has said in a report.

The latest ‘Economic Insight’ report for the Middle East, commissioned by ICAEW and compiled by Oxford Economics, predicts a slow recovery for the GCC region this year due to extended oil production curbs.

The GCC growth forecast has been revised down to 2.2% from 2.7% three months ago, though non-energy sectors remain resilient, including in Qatar and Bahrain, it said.

The Opec+ group’s extension of voluntary output cuts through Q3 implies a delayed recovery in GCC energy sectors. GCC oil output will now shrink by 2.6% this year instead of the 1.3% expansion forecasted three months ago, ICAEW noted.

Saudi Arabia, which is cutting production to the greatest extent, will see oil activities contract by 5% this year, down from a predicted growth of 0.7% three months ago. However, as voluntary production cuts are reversed in 2025, energy sectors will begin making positive contributions to GCC growth.

Bahrain’s GDP growth is 3.1% this year, but is expected to slow to 1.4% in 2025,

“Since Qatar is not involved in the Opec+ production quotas, its gas sector is a priority, with authorities doubling down on the North Field gas expansion project, promising a positive medium-term impact,” ICAEW said.

Bahrain, on the other hand, continues to diversify its economy and reduce reliance on oil revenues. Last year, its non-oil growth grew by 3.4%, accounting for nearly 84% of GDP.

High-frequency data paints a positive outlook for non-energy sectors across the GCC.

In Saudi Arabia, investments are expected to flow into key sectors supporting giga-projects, including construction, manufacturing, and transportation.

Strong momentum in the sports and entertainment sector will also be seen as the country’s transformation continues. The hospitality sector will likely follow, with tourism remaining key to Saudi’s growth agenda.

Tourism is a strategic sector in other countries too, and will remain a key growth driver. Tourism activity has rebounded strongly, with record visitor numbers across the GCC in 2023, extending into this year.

According to ICAEW, non-oil economies will continue to grow despite the GCC’s fiscal positions deteriorating. Saudi Arabia, Bahrain, and Kuwait will likely see budget deficits this year and next as the current oil price level is below the fiscal breakeven point. “However, the overall GCC budget position will likely remain in surplus, bolstered by strong financial standings and favourable credit ratings, allowing continued access to funding from capital markets and IPOs,” ICAEW noted.

Hanadi Khalife, head of Middle East, ICAEW, said: “While geopolitical risks present headwinds for the GCC and wider Middle East, we are encouraged by the ongoing commitment to diversification and sustainability targets.

“Qatar, for example, became the first GCC sovereign to issue green bonds despite not having explicit net-zero targets. Bahrain is also aligning its non-oil economic growth with its Economic Vision 2030 and COP28 commitments to reduce carbon emissions by 30% by 2035.”

Scott Livermore, ICAEW economic adviser, and chief economist and managing director, Oxford Economics Middle East, said: “Although the region faces escalating pressures amid slowing global economies, the GCC remains relatively positive due to strong bilateral deals and investment.

“Qatar recently signed a 20-year supply contract with India for 7.5mn tonnes of liquefied natural gas annually, and a 27-year contract with Taiwan for 4mn tonnes.

“Bahrain has also seen significant investment growth following the launch of the Golden License initiative in April 2023, which requires a minimum investment of $50mn and the creation of at least 500 jobs. Bahrain’s financial services sector contributed nearly 18% of GDP, surpassing oil, which contributed 16%.”

The GCC inflation forecast for 2024 has been lowered by 0.3 percentage points to 2.2% this year, with a further slowdown to 2.1% expected next year.

Excluding housing rents in some countries, notably Saudi Arabia, inflationary pressures remain contained, with rates below 2% in all GCC countries except Kuwait and the UAE.

Given the exchange rate pegs against the US dollar, GCC central banks tend to track the US Federal Reserve's policy rates.

The US Federal Reserve is expected to begin gradually cutting policy rates in September, totalling a 150bps reduction by the end of 2025, ICAEW added.