Lower Oil Output ‘to Affect GCC's GDP Recovery in 2021’: Kuwait-Based Institute

GCC economic growth witnessed a downward revision of 20 bps for 2021 to a growth of 2.5% on the back of lowered forecast for oil GDP for the region by 130 bps to a marginal growth of 0.3%, a report said.

Non-oil GDP forecast was raised by 30 bps to 3.8% and a faster recovery in 2022 is expected to push growth to 4.2%, 40 bps higher than previous forecast, added the report titled “Kamco Invest: “Event Update - IMF REO" - October 2021” by Kamco Invest, a regional non-banking financial powerhouse headquartered in Kuwait.

GDP growth in the Mena region is expected to average at 4.1% in 2021 in line with the IMF’s previous forecast. Growth in 2022 is also expected to reach 4.1%, 40 bps higher as compared to previous expectations.

In terms of trade volumes, the report said that merchandise trade has recovered to pre-pandemic levels. However, the services sector is yet to recover as seen in hotel demand that has although recovered, it is yet to see full revival.

Exports of goods and services from the Mena region is expected to see a sharp recovery this year with a growth of 31.7%, but would be slightly below 2019 levels at US$1.24 trillion as compared to US$1.29 trillion in 2019 and US$940.7 billion in 2020. In 2022, growth is expected to be 7.8%, pushing exports to above pre-pandemic level at US$1.34 trillion.

Imports are also expected to see similar growth this year and next year at 12.7% and 7.5%, respectively. As a result, current account balance is expected to be positive this year and next year after turning negative in 2020.