Dubai Expo 2020 so far looks positive and will undoubtedly boost travel and hospitality within the UAE, thus proving a critical marker for recovery in its travel and tourism sector in terms of visitor numbers, PwC said in its latest Middle East Economy Watch, ‘Recovery accelerates in the GCC, despite inflation concerns’.
The report said a combination of factors are contributing to recovery across the region. Non-oil growth is a pivotal driver of this recovery; sectors such as financial services have emerged from the pandemic in a position of strength. When looking at Saudi Arabia, its large pool of domestic demand and the government’s commitment to the giga-projects is central to spurring economic recovery.
The recovery in oil prices to their highest sustained level since 2014 and the tapering of production cuts by OPEC+ are also helping drive a solid improvement in public finances, with the IMF forecasting that the GCC as a whole will return to a fiscal balance in 2023, for the first time since 2014. Even Oman, which was struggling with a large structural deficit before COVID-19 is expected to return to surplus in 2022 as a result of significant reforms on top of the rebounding oil price.
While buoyant oil and non-oil sectors are pivotal for economic growth across the GCC, there has been much speculation on a global scale that the easing of stimulus measures enacted to mitigate the impact of the pandemic, combined with increased oil prices, will lead to an increase in inflation, however indicators suggest this is less of a concern in the GCC than in other territories.
Leading indicators from Q3 suggest economies in the region continue to build momentum and are now firmly on the road to return to pre-pandemic levels. This coupled with robust purchasing managers indexes (PMI) across the region recording levels above 50-points showcasing economic expansion, recovery is undeniable. The PMI, one of the best proxies for non-oil private sector activity, reached a record level of 60.6 in Qatar in September and a 7-year high of 58.6 in Saudi Arabia, with the UAE reporting a Q3 average of 53.7, its strongest in over two years.
GCC states now look to rebalance public finances which were impacted by the oil price decline. The IMF now forecasts an aggregated GCC general government fiscal deficit of just -1.8% of GDP in 2021 as compared to forecasts of -5.7% a year ago and -3.0% in April 2021. And if oil prices remain elevated in the year ahead, then the GCC as a whole could return to fiscal balance in 2023, for the first time since 2014.
Following a scarcity of IPO activity across exchanges in the region, 2021 has seen a surge of major IPOs with Saudi Arabia and Abu Dhabi leading the pack. The current shift shows growing confidence in the region, as a result of high oil prices and the COVID-19 recovery, together with high global equity valuations as well as the need for government entities to raise financing. Increased investor
Follow Arabian Post
Select Arabian Post as your preferred source on Google and MSN News for trusted business news and Arab politics and updates.
