DUBAI- The six-member Gulf Cooperation Council faces a steep economic contraction this year before partially rebounding in 2021, with most countries facing sharper declines than previously estimated, a quarterly Reuters poll showed.
Analysts in the Oct. 13-25 poll maintained their view that the region’s heavy dependence on hydrocarbons left it particularly hard-hit by the coronavirus crisis because of its effect on oil demand and prices.
New lockdown measures as infections continue to soar in the United States, Europe and elsewhere, could exacerbate already depressed economic activity.
Saudi Arabia, the region’s largest economy, is expected to face a GDP contraction of 5.1 percent this year and rebound to 3.1 percent growth next year and 2.7 percent growth in 2022. A poll conducted three months ago saw the world’s largest oil exporter contracting 5.2 percent in 2020.
“The region is now facing tough policy choices. Fiscal support is still needed to fight persistent and rising infections, already showing up in Europe and the US,” noted analysts at NBK.
“But from a medium-term perspective, governments should aim to achieve fiscal and external sector sustainability in the likely scenario of low oil prices.”
The United Arab Emirates, which has seen a surge in new COVID-19 cases in the past month or so, is expected to see GDP decline 6.0 percent this year, grow 2.7 percent next year and expand 3.8 percent in 2022. In July, analysts expected a 5.1 percent decline in 2020 and 2.6 percent growth in 2021.
“The UAE economy will suffer a deeper contraction this year than we anticipated in May,” the Institute of International Finance said in a research note.
“Dubai’s economy may contract by at least 8 percent, more than Abu Dhabi, as its large exposure to tourism, aviation, and other services makes it more vulnerable to the effects of the pandemic,” the IIF said, adding that output declined 9 percent in the first half of the year and employment dropped by 10 percent.
Median forecasts for Kuwait expected a 6.3 percent contraction this year, 2.6 percent growth next year and 3.3 percent growth in 2022. Three months ago it was seen shrinking 6.1 percent in 2020 and expanding 2.5 percent in 2021.
Qatar’s forecast for this year was unchanged at a 4.0 percent contraction, while expectations for growth next year improved to 3.0 percent from 2.8 percent and it was seen expanding 3.4 percent in 2022.
Oman and Bahrain’s forecasts were weaker, seen shrinking 4.9 percent and 4.8 percent this year respectively from contractions of 4.7 percent and 4.4 percent seen in July. Oman is expected to grow 2.5 percent next year, versus a July estimate of 3.0 percent, and 2.7 percent in 2022. Bahrain’s 2.6 percent growth forecast for 2021 was unchanged and it was expected to grow 2.1 percent in 2022.