GCC economies bounce back with National Visions firmly in sight – PwC Middle East Economy Watch reports
PwC’s latest Middle East Economy Watch - Advancing with National Visions shows that the GCC is especially well placed to implement their long-term National Vision transformation plans due to substantial financial resources to direct to their objectives, and the leadership continuity and commitment to see them through. Overall, progress on key KPIs across the region is promising, with some room for improvement on others.
As global economies experience what the IMF has described as a “rocky recovery” post pandemic, marked by inflation, high interest rates and geopolitical uncertainty, GCC economies are bouncing back, even in the worst-affected sectors. This positive outlook is attributed to high oil prices and strong balance sheets at the sovereign and corporate levels, as well as continued diversification and economic resilience as countries pursue their National Visions. However, the wider Middle East remains more vulnerable to these global trends, according to the report.
The latest Middle East Economy Watch outlines that although factors including the pandemic created a loss in expat populations, these numbers have since recovered - rebounding by 2.8 percent in 2022 and expected to surpass 2019 levels later this year. Some countries such the UAE and Saudi Arabia have set highly ambitious population expansions plans, fuelling further investment in infrastructure.
The report highlights that the region has been quick to secure the non-oil recovery, even in the hardest-hit sectors of hospitality, transportation and retail/wholesale trade. In 2022, the five GCC states for which regular tourism data is available, Saudi Arabia, UAE, Qatar, Bahrain, and Oman, showed a lag of -8 percent behind 2019 levels. However, by Q4, Qatar, Saudi and Bahrain were well above Q4-19 levels.
According to Richard Boxshall, Partner and Chief Economist at PwC Middle East, 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, PwC expects the momentum and reinvestments driving this transformation to increase.
Saudi Arabia’s Vision 2030 is hitting the halfway mark from its announcement in 2016, and has seen an out-performance in some areas, such as its female workforce participation surging to 36 percent, already ahead of the 2030 target of 30 percent. The commitment to economic diversification is also paying off: the share of the non-oil economy is at 59 percent with non-oil GDP in 2022 being 15 percent larger in real terms and 28 percent in nominal terms compared to the pre-vision baseline.
PwC’s Partner, Middle East Strategy and Markets Leader, Stephen Anderson, added, “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."