PwC Middle East Report: GCC Economies Weather the Storm
In a world grappling with a “rocky recovery” from the COVID-19 pandemic, the Gulf Cooperation Council (GCC) region stands as a beacon of resilience and strength. The latest PwC Middle East Economy Watch report, titled “Advancing with National Visions firmly in sight,” highlights the GCC’s ability to withstand global economic challenges, propelled by high oil prices and robust sovereign and corporate balance sheets. Despite the expected global growth slowdown, the GCC is projected to maintain a resilient growth rate of 3.2%, enabling further reinvestment in advancing their National Visions.
One of the remarkable aspects of the GCC’s recovery is the revival of the non-oil economy, even in the hardest-hit sectors such as hospitality, transportation, and retail/wholesale trade. A significant contributing factor to this recovery has been the return of expatriate populations, driving demand across various sectors. While global economies grapple with inflation, high interest rates, and geopolitical uncertainties, the GCC economies are bouncing back, defying expectations. This positive outlook can be attributed to the region’s favourable oil prices, strong balance sheets at the sovereign and corporate levels, and their unwavering commitment to diversification and economic resilience as they pursue their National Visions. However, the wider Middle East remains more vulnerable to these global trends, as highlighted in the report.
Richard Boxshall, Partner and Chief Economist commented: “The GCC as a whole is making good progress towards achieving its countries’ National Visions, with areas of common focus including non-oil diversification, improving infrastructure, advancing digitalisation, creating competitive business environments and workforce nationalisation targets for the private-sector. Most GCC countries are also advancing towards their sustainability objectives, such as investing in solar generation capacity. With COP28 on the horizon, we expect the momentum and reinvestments driving this transformation to increase”.
The PwC report emphasizes that the GCC is well-positioned to implement its long-term National Vision transformation plans. With substantial financial resources at their disposal, the GCC states have the means to direct investments towards achieving their objectives. Moreover, the region benefits from leadership continuity and commitment, ensuring that these visions are not merely rhetoric but are actively pursued. Promising progress has been observed across various key performance indicators (KPIs) throughout the region, with room for improvement in some areas.
Stephen Anderson, Partner, Middle East Strategy and Markets Leader, said: “The GCC economies have shown great resilience in the face of many obstacles being experienced globally, with the growth of the non-oil economy and increased focus on sustainability enabling them to lead the diversification agenda on a larger scale. Continued government investment in strategic sectors and projects in pursuit of their National Visions will underpin future growth, allowing us to weather the worst of the global slowdown throughout 2023.”
The regional economy has rebounded strongly since the pandemic, emerging stronger and more resilient than before. The report examines how the non-oil sectors in the GCC have not only recovered but have also surpassed their pre-pandemic levels, even in severely affected sectors such as transportation and hospitality. A key driver of this recovery has been the resurgence of tourism, particularly in Saudi Arabia and Qatar, where tourism is reaching new record levels. The rebounding expatriate population in the region has also contributed to the economic recovery.