The sharp rise in the prices of oil and gas since the beginning of the Russia-Ukraine conflict in late February 2022 has been a boon to the Gulf Cooperation Council (GCC) nations. Against this backdrop, GlobalData has revised its 2022 economic growth projections for GCC nations upwards to 4.4% in 2022 from its earlier projection of 4.2% in January 2022.
Lifting of COVID-19 restrictions, higher vaccination rates and increased mobility are expected to keep the global demand for oil and gas buoyed in H1 2022. Meanwhile, the prices of crude oil and natural gas rose sharply since the beginning months of 2022, rising by 52.3% and 107.3%, respectively, on an annual basis, as of 2 May 2022. Robust demand along with a sharp rise in the hydrocarbon prices is expected to aid the economic growth of the GCC nations in 2022.
Arnab Nath, Economic Research Analyst at GlobalData, says, “The GCC nations are projected to grow at their fastest pace in years on higher hydrocarbon prices. Among the six GCC nations, Saudi Arabia is projected to be the fastest growing with real GDP forecast at 5.1% in 2022, followed by Qatar (4.1%), Kuwait (4%), the UAE (4%), Bahrain (2.7%) and Oman (2.7%). The bullish sentiment for the six wealthy oil exporters is expected to sustain through the rest of 2022 with the GCC nations accounting for a quarter of the world exports of mineral fuels and mineral oils.”
Qatar holds 29% of the natural gas reserves in the Middle East and 11.5% of the world natural gas reserves, as of 2020. Most European nations, which import natural gas from Russia are turning to Qatar as a replacement following the imposition of sanctions, which is expected to significantly boost Qatar’s revenue. The country is also expected to host the FIFA 2022 World Cup due to which it has invested USD 300 billion in the infrastructure development. GlobalData forecasts the real GDP growth rate of Qatar at 4.1% in 2022, higher compared to 2.6% in 2021, the highest since 2016.
Saudi Arabia recorded its highest ever growth rate since 2011 with the real GDP rising by 9.6% on an annual basis in Q1 2022. The country’s contribution of more than 8% to the world oil exports is aided by higher oil prices. Along with it, robust growth in the non-oil sector is expected to be the main economic growth drivers. GlobalData projects the Saudi Arabian economic growth to almost double from 2.6% in 2021 to 5.1% in 2022.
Dubai Expo (October 2021 to March 2022) infused infrastructure spending, higher investments, support from the non-oil sector and higher oil output is expected to drive the economic growth of the UAE in 2022. With the country accounting for 10.7% of the world oil exports, the rise in the price of hydrocarbons has resulted in GlobalData revising the 2022 economic growth projections of the UAE to 4% in April 2022 from its earlier projection of 3.7%.
Kuwait, Oman and Bahrain are forecast to grow by 4%, 2.7% and 2.7%, respectively, in 2022.
Nath concludes, “GCC nations import lion’s share of their food from other nations. With rise in the international commodity and food prices, the overall price in GCC nations is projected to rise from 2% in 2021 to 2.6% in 2022. Another risk for the GCC nations is the slowing down of global demand, which may directly impact the revenue earnings of the region.”