Economic growth in the Middle East is projected to accelerate to 3.7 per cent in 2025 compared to the anticipated 2.1 per cent this year, largely driven by the reversal of oil production cuts by the OPEC+, the latest report said.
The GCC region is poised for a significant rebound, with growth projected to more than double to 4.4 per cent in 2025 as oil production cuts are gradually phased out, according to the latest ICAEW Economic Insight report for the Middle East.
The report also highlighted the resilience of the GCC’s non-energy sectors, which are expected to expand by 4.4 per cent in the coming year.
“Strong domestic momentum, coupled with anticipated interest rate reductions, is expected to fuel consumption and private investment, boosting the region’s overall economic outlook,” the report, prepared by Oxford Economics, said.
The report revised GCC inflation for 2024 lower at 1.7 per cent, but said it is expected to rise to 2.1 per cent next year.
“Inflation remains below 2 per cent in all GCC countries except Kuwait and the UAE, where slightly higher rates persist due to housing price pressures,” the report said.
GCC growth forecast adjusted
The report said the extension of oil production cuts by the OPEC+ grouping has led to a slight downward revision of the GCC’s 2024 growth forecast to 2.1 per cent from 2.2 per cent three months ago.
“While this reflects the temporary impact on the region’s energy sector, the outlook for 2025 remains optimistic as oil production increases, providing a strong boost to the region’s economies,” it said.
The report said recent PMI readings suggested strong domestic activity, and anticipated interest rate reductions are expected to further bolster consumption and private investment.
These sectors, including tourism, trade, and finance, are becoming crucial growth drivers in the region’s economic diversification efforts, it said.
Kuwait faces challenges amid oil cuts
The report, however, said Kuwait’s economy is forecast to grow by only 0.5 per cent due to ongoing oil production cuts, but is expected to rebound to 2.5 per cent in 2025-26.
The recent discovery of the Al-Nokhatha oil field, with estimated reserves of 3.2 billion barrels, promises higher future oil gains and supports Kuwait’s agenda to expand production output to 4 million barrels per day by 2035, it said.
Geopolitical risks remain
The report also highlighted the ongoing geopolitical risks, particularly regional conflicts, which could impact sectors linked to tourism and trade, adding a layer of uncertainty to the forecast.
However, a potential breakthrough in nuclear talks with Iran offers some upside potential for oil production and exports in the medium term, it said.
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