From BRICS to dwindling oil revenues, 2024 was mixed year for Gulf

Introduction

2024 proved to be a year of mixed fortunes for the Gulf Cooperation Council (GCC) countries, characterized by economic challenges in the oil sector but resilience and growth in non-oil sectors.

Let’s review key developments

Economic Performance

Oil Sector Challenges

The GCC experienced a contraction in the oil sector due to OPEC+ production cuts aimed at stabilizing global energy prices.

Saudi Arabia, UAE, Kuwait, and Oman extended voluntary output cuts until the end of November 2024, leading to a significant 7.5% contraction in oil-GDP during the first half of the year.

Non-Oil Sector Resilience

Despite oil sector challenges, the non-oil economy demonstrated robust grow

Overall non-oil GDP grew by 3.7% in 2024

The UAE led diversification efforts with accelerated growth in financial services, logistics, transport and tourism.

Saudi Arabia saw strong performance in tourism and renewable energy sectors. They have big plans but FDI is a challenge as nations wait and watch change in cultural climate.

Overall Economic Outlook

GCC economy grew by 1.6% in 2024, with projections of acceleration to an average of 4.2% over 2025-2026

The UAE’s economy was set to grow by 3.7% in 2024, with expectations of 4.5% growth in 2025

Saudi Arabia’s economy was forecast to grow by 1.4% in 2024, with a projected rebound to 4.4% in 2025

Diversification and Reform Efforts

GCC countries continued to pursue ambitious reform agendas and economic diversification:

The UAE maintained its position as a global leader in attracting Foreign Direct Investment (FDI)

Saudi Arabia’s Vision 2030 led to substantial investments in non-oil sectors

Bahrain showed improvement in growth across diverse non-oil activities

Fiscal and Monetary Developments

GCC fiscal balances were projected to turn into a deficit in 2024, with expectations to remain in deficit in the medium term

Inflation remained relatively low, with the aggregate GCC inflation projection at 1.8% for 2024

GCC central banks followed the US Federal Reserve’s rate path, with expectations of rate cuts in 2024

BRICS Expansion and Global Influence

The expansion of the BRICS bloc, which now includes several major oil producers, has implications for the Gulf region

With the addition of Iran, the UAE, and potentially Saudi Arabia, the BRICS group could control nearly half of global oil production

This expansion enhances the bloc’s influence in commodities trading and global economic affairs

Conclusion

2024 presented challenges for the Gulf’s oil-dependent economies, the region demonstrated resilience through strong non-oil sector growth and continued diversification efforts.

The expanding influence of the BRICS bloc, very though far fetched, and ongoing economic reforms suggest a transformative period for the Gulf economies as they navigate the complexities of global economic shifts.