World Bank expects GCC economy to grow by 1% in 2023, 3.6% in 2024

Safaa El-Kogali, the World Bank’s Country Director for the GCC

The Gulf Cooperation Council (GCC) region is estimated to grow by 1% in 2023, before rising to 3.6% and 3.7% in 2024 and 2025, respectively, Safaa El-Kogali, World Bank Country Director for the GCC, told Argaam.

She added that the GCC countries’ weaker performance this year was mainly due to a decline in oil sector activities, which is expected to contract by 3.9%, reflecting successive output cuts by OPEC+ and the global economic slowdown.

The decline in oil activities will be compensated for by non-oil sectors, which are expected to grow by 3.9% in 2023 and 3.4% in the medium term, backed by sustained private consumption, strategic fixed investments, and accommodative fiscal policy.

The composition of GCC economies is mainly affected by the developments that occur in both oil and non-oil sectors.

As for the performance of Saudi economy, El-Kogali expected the oil sector to contract by 8.4% during 2023, reflecting the restrictions imposed on oil production and agreed upon within OPEC+.

The Kingdom's overall GDP will likely show a contraction of 0.5% in 2023 before a recovery of 4.1% in 2024 to reflect expansions of oil and non-oil sectors.

Regarding women’s participation in labor force, the official said the GCC countries witnessed a noticeable increase in the women’s participation over the past decade, and Saudi Arabia outpaced its GCC peers in this regard.

El-Kogali indicated that the World Bank's recently published Gulf Economic Update addresses the developments in the Kingdom related to women joining the workforce, as their participation more than doubled from 17.4% to 36% between 2017 and 2023.

This positive development is the result of an unprecedented reform that facilitated the entry of more women into the labor market, in addition to shifts in social norms that were facilitated thanks to the effective communication by the government, which contributed to changing social attitudes.

As for structural economic reforms in the GCC, El-Kogali said the countries showed a noticeable improvement in their non-oil economies and made progress in diversifying their economies and promoting social advancement. This was reflected in the sustainable growth in the non-oil sector across the region in 2022, which continued during the economic contraction resulting from oil output cuts in 2023.

El-Kogali added that the diversification and development of the non-oil sector had a notable impact on creating jobs in various sectors and geographic regions across the GCC.

The regional labor market continues to strengthen as confidence in business enterprises and employment activities return to pre-COVID levels.

The total number of Saudi jobholders reached 2.6 million this year, and the ratio of non-Saudis to Saudis stands at nearly 3:1. This expansion coincides with the total increases in workforce participation, the ratio of employment to the total population and lower unemployment.

She added that non-oil commodity exports in the GCC are still low. The significant improvement in external balances of the GCC countries in the past years was attributed to oil exports, but a few countries reported better non-oil merchandise exports. This, in turn, requires policymakers’ attention to enhance the diversification of their export portfolios.