GULF ECONOMIC UPDATE Structural Reforms and Shifting Social Norms to Increase Women's Labor Force Participation Fall 2023 Gulf Economic Update Structural Reforms and Shifting Social Norms to Increase Women's Labor Force Participation Fall 2023 Middle East and North Africa Region © 2023 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or fail- ure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immuni- ties of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover photos courtesy of: (top) Business Meeting: Gorodenkoff/Shutterstock (center, left) Flags: Alioui Ma/Shutterstock (center, right) Graph: Denphumi/Shutterstock (bottom) Lady with Laptop: Shahd Al Hamdan Further permission required for reuse. Publication design and layout by The Word Express, Inc. TABLE OF CONTENTS Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii ‫ملخص تنفيذي‬ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii 1. Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3. Special Focus: Structural Reforms and Shifting Social Norms to Increase Women's Labor Force Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 The growth in the labor force participation of Saudi women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 The reasons behind the unprecedented surge in participation in Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . 24 The Saudi experience: What happened, what can we learn? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Annex 1. GCC Summary Statistics Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Annex 2. Country Summary Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 iii List of Figures Figure 1 Regional GDP Is losing steam after strong performance in 2022… . . . . . . . . . . . . . . . . . . . . . .2 Figure 2 …with consumption and investment continuing to be the key drivers of economic activity in H1-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Figure 3 All GCC countries are showing weaker growth during H1-2023… . . . . . . . . . . . . . . . . . . . . . . .2 Figure 4 …driven primarily by contraction in oil sector activities in line with OPEC+ agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Figure 5 Despite contracting oil sector, the non-oil sectors showing resilience and cushioning the downturn… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 6 …with the PMI still in expansion territory in H1-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Figure 7 Meanwhile, inflation across the GCC region started to moderate… . . . . . . . . . . . . . . . . . . . . . .3 Figure 8 …as well as international commodity prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Figure 9 Regional average inflation continues to remain well-below peers... . . . . . . . . . . . . . . . . . . . . . .4 Figure 10 …while banking system across the region remains well-capitalized and liquid . . . . . . . . . . . . 4 Figure 11 Deteriorating fiscal positions during H1-2023 as a result of falling oil receipts and loose fiscal policy… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Figure 12 …Despite the economic downturn, public debt remains stable for most countries and lower than average MENA level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Figure 13 Current account surplus is narrowing at the back of lower oil receipts... . . . . . . . . . . . . . . . . . 6 Figure 14 …while non-oil merchandise exports across the GCC region continue to lag, several countries have shown progress in recent years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 15 Employment-to-population ratio across GCC countries is higher than in MENA region… . . . 7 Figure 16 …while progress has been made on the non-oil fiscal position . . . . . . . . . . . . . . . . . . . . . . . . . .7 Figure 17 MENA’s growth is expected to slow down sharply in 2023 and recover in 2024… . . . . . . . . 10 Figure 18 …while oil prices moderate to reflect uncertainties surrounding oil markets . . . . . . . . . . . . . 10 Figure 19 Despite decoupling between the oil and non-oil economies, overall GDP is projected to expand in 2023… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 20 …driven primarily by private consumption, investments, and looser fiscal policy . . . . . . . . . 12 Figure 21 Following a strong performance in 2022, individual GCC economies are projected to slow down in 2023… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 22 GCC inflation remains contained and relatively low… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Figure 23 …despite robust private sector credit in 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 24 The GCC region projected to register a narrow surplus in 2023 and moderate in the medium term… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Figure 25 …with divergence in individual countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Figure 26 Overall, debt-to-GDP ratio is on a declining trajectory for most GCC countries… . . . . . . . . . 15 Figure 27 …while robust foreign reserve assets provide economic resilience from future shocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Figure 28 Current account balance surpluses are anticipated to continue in GCC region in the medium term… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 29 …driven by high oil receipts as well as merchandise trade exports . . . . . . . . . . . . . . . . . . . . .16 Figure 30 Female labor force participation rates in the GCC, MENA and OECD (overall and for citizens only, 2016 and approximately 2021) . . . . . . . . . . . . . . . . . . . . . . . . . 21 Figure 31 Female labor force participation rate (2017 to 2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Figure 32 Labor force participation rates of Saudi women across age groups (2017 and 2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 iv GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION Figure 33 Labor force participation rates of Saudi women across education levels (2018 and 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Figure 34 The Saudi female adult population by labor force status (2016 to 2023) . . . . . . . . . . . . . . . . 23 Figure 35 Growth of employment of Saudi women by economic activity (Q1-2019 to Q2-2023) . . . . .23 Figure 36 The history of Saudi gender reforms and the female labor force participation rate of Saudi women (2016 to 2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Figure 37 Total employment of Saudi women by private and public sector (2017 and 2023) . . . . . . . 28 Figure 38 Growth in employment of non-Saudis and Saudi women, by economic activity (2019 to 2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 List of Boxes Box 1 Tracking recent structural reforms (focusing on Q2- and Q3-2023) . . . . . . . . . . . . . . . . . . . . . 8 Box 2 Risks to regional oil and natural gas supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11  v ACRONYMS ADNOC The Abu Dhabi National Oil Company LNG Liquefied Natural Gas AML Anti-Money Laundering MENA Middle East and North Africa BHR Kingdom of Bahrain MHRSD Ministry of Human Resources and CFT Combating the Financing of Terrorism Social Development CIT Corporate Income Tax MTFP Medium-Term Fiscal Balance Plan CPI Consumer Price Index NIF National Infrastructure Fund FBP Fiscal Balance Program OECD Organization for Economic FDI Foreign Direct Investment Co-operation and Development FED Federal Reserve Board OMN Sultanate of Oman FGF Future Generations Fund OPEC Organization of the Petroleum FLFPR Female Labor Force Participation Rate Exporting Countries GCC Gulf Cooperation Council PIF Public Investment Fund GDP Gross Domestic Product PMI Purchasing Managers’ Index GRE Government-Related Entity QTR State of Qatar HRDF The Human Resources Development SANED Unemployment Insurance Scheme Fund TVET Technical and Vocational Education ICT Information and Communication and Training Technology TVTC Technical Vocational and Training ILO International Labor Organization Corporation KSA Kingdom of Saudi Arabia UAE United Arab Emirates KWT State of Kuwait vii ACKNOWLEDGEMENTS T his report is the product of the Middle East Social Protection Specialist). This section was cleared and North Africa unit in the Macroeconomics, by Anush Bezhanyan (Practice Manager). Trade, and Investment (MTI) Global Practice The entire report was developed under the guid- at the World Bank Group. The Macroeconomics ance of Safaa El-Tayeb El-Kogali (Country Director, section of the report was led by Khaled Alhmoud GCC) and Eric Le Borgne (Practice Manager). (Senior Economist) and co-authored by Olena The authors are grateful to Ashwaq Maseeh Ftomova and Xinyue Wang (both Macroeconomics (Research Analyst) for her valuable inputs and con- Consultants). tributions. Special thanks to Ekaterina Georgieva The Special Focus section was led by Johannes Stefanova (Senior Program Assistant) for administra- Koettl (Senior Economist) and co-authored by: Dana tive support. Jasmine Alrayess (Consultant), Sofia Gomez Tamayo Translation Services by Mirna Tabet. (Consultant), and Gael Fostier de Moraes (Consultant) Shahd Alhamdan and Ashraf Al-Saeed man- with Carole Chartouni (Senior Economist), Ekaterina aged cover photography, media relations, and dis- Pankratova (Senior Social Protection Specialist), semination. Nayib Rivera (Economist), and Nahla Zeitoun (Senior ix From the Regional Director, GCC Countries Middle East and North Africa Region, World Bank Group SAFAA EL-TAYEB EL-KOGALI FOREWORD T he Gulf Cooperation Council (GCC) econo- in weaker integration between oil and non-oil sectors. mies have been a bright spot in an otherwise To maintain this track record, GCC countries will need gloomy economic landscape. Average growth to continue to exercise prudent macroeconomic man- in the GCC surpassed 7 percent in 2022 led by Saudi agement, stay the course with structural reforms, and Arabia, its biggest economy, which was globally the increase non-oil exports. fastest growing large economy. This growth was not Downside risks remain and it would be amiss just a result of buoyant hydrocarbon prices but also not to mention them. The conflict in the Middle East continued growth of non-oil sectors. The latter was presents major risks to the region and the GCC out- the result of persistent structural reforms undertaken look if it extends or expands to include other regional by several GCC countries to improve the investment players. While it is too early to quantify the impact and environment, promote flexible labor markets, and channels of the conflict, we already witness a 4 per- encourage women to join the labor market. cent surge in global oil futures. Although China is GCC countries have used the windfall revenues bouncing back after emerging from tight Covid-19 from oil and gas to rebuild their buffers, pay down lockdowns, troubles in the real estate sector could still their debt, and shore-up their sovereign wealth funds. disrupt this trajectory. Persistent high inflation in the They have also sought to protect their vulnerable pop- world’s major economies has not been entirely van- ulations with continued subsidies on food, fuel, and quished suggesting a high interest rate environment utilities. Such policies have limited the impact of infla- for a longer period. tion on the domestic economy. Finally, GCC countries Windfall revenues are anticipated as a result of have also used their financial muscle to support eco- higher oil prices driven by the conflict in the Middle nomically weaker countries in the region. East. However, the extent and duration of the con- The stellar growth of 2022 is slowing down and flict will play a pivotal role in determining economic growth is expected to moderate to 1 percent in 2023 ramifications not only on energy markets but also on before picking up again to 3.6 percent in 2024. The regional financial and trade markets and overall eco- decline in economic activity in 2023 is driven by consec- nomic confidence. utive production cut decisions by OPEC+ in an effort to The Special Focus section of the report dis- stabilize global oil prices. However, non-oil GDP contin- cusses the power of structural reforms and social ues its growth trajectory reaching 3.9 percent, resulting norms in advancing female labor force participation xi in Saudi Arabia. Saudi Arabia experienced an (iii) effective government communications. Saudi unprecedented surge in female labor force par- Arabia’s success in increasing female labor force ticipation since 2017 as a result of: (i) chang- participation from 17.4 percent in 2017 to 36 percent ing regulations and shifting social norms, (ii) the in 2023 offers important lessons to other countries in implementation of sound structural reforms, and the region and the world. xii GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION EXECUTIVE SUMMARY A fter the strong performance of 2022, moderated during the first nine months of 2023, sup- signs of weakening economic activity are ported by a strong U.S. dollar, cheaper imports, and emerging in the first half of 2023. The tight monetary conditions. Gulf Cooperation Council (GCC) region is experienc- Fiscal and external balances faced chal- ing economic activity deceleration during the first six lenges during the first half of 2023. The collective months of 2023 following the strong growth of 7.4 regional fiscal surplus in the GCC narrowed during percent in 2022. This slowdown is primarily driven H1-2023—from 4.9 percent of GDP in 2022—driven by OPEC+ oil production cuts along with challeng- by lower oil receipts and looser fiscal policy. Some ing global economic conditions. Despite these head- countries maintained their fiscal surplus, even while winds, non-oil activities demonstrated resilience and those surpluses narrowed, others shifted to deficits. robust growth supported by private consumption, Public debt ratios spiked during the pandemic but investments, and loose government spending. have been on a declining trajectory since then, with Steady structural reforms and diversifica- the ratios stabilizing in H1-2023 for some countries. tion efforts are paying off; however, more is still Meanwhile, the regional external balance surplus needed. Improvements in the performance of non- also narrowed during H1-2023 on the back of weak- oil sectors across GCC countries suggest diversifi- ening oil receipts. Furthermore, non-oil merchandise cation efforts are bearing fruit and weakening links exports continued to lag across several GCC coun- between the oil and non-oil sectors. This progress is tries, underscoring the need for further diversification clearly reflected in the growth of employment oppor- efforts in the non-oil exports portfolio. tunities and enhancements in labor market dynamics, Looking ahead, GCC economic growth is including increased female labor force participation projected to decelerate to 1 percent in 2023, rates and improved labor mobility. Despite progress driven largely by the impact of an anticipated 3.9 per- in structural reforms in the majority of GCC countries, cent contraction in the oil sector, following OPEC+ further efforts are still needed to mitigate the impact production cuts and global economic challenges. of global oil price volatility and to reinforce macroeco- The non-oil sectors within the region are expected to nomic stability. continue their growth trajectory, growing at 3.9 per- Inflationary pressures are moderating cent, supported by sustained private consumption, while monetary policies are tightening. After a strategic fixed investments, and accommodative gov- rise in 2022 to 3.6 percent, inflation across the region ernment fiscal policy. The GCC is expected to have xiii low inflation (2.8 percent) in 2023 and a narrowed positive structural internal policy reforms, including fiscal surplus (0.8 percent of GDP) due to declining those focused on enhancing female workforce partic- oil receipts, with minor recovery projected for 2024- ipation discussed extensively in the special focus sec- 2025. Fiscal balances will differ across the GCC tion of this report. countries reflecting individual countries' fiscal consol- Special Focus: Structural Reforms and idation measures. Similarly, the regional external bal- Shifting Social Norms to Increase Women's Labor ance is anticipated to remain in surplus (9.6 percent Force Participation. Saudi Arabia has experienced of GDP) underpinned by robust oil receipts, although an unprecedented surge in female labor force partic- diversifying non-oil export remains crucial for long- ipation since 2017 (from 17.4 percent in 2017 to 36 term economic resilience. percent in 2023). Several factors were crucial: First, The GCC economic outlook is challenged major legal reforms and new programs to promote by risks driven by geopolitical instability; most impor- female employment were implemented, creating a tantly the developments or escalation in the con- supportive environment for women to pursue careers. flict in the Middle East, potential divergences within Second, effective communication on the importance OPEC+, and prolonged periods of tight monetary pol- of women joining the labor market supported the pos- icy threaten to restrain the non-oil sector's growth. itive shift in social norms. Third, economic structural Moreover, the region's economic prospects are closely changes have created the necessary labor demand tied to external factors such as China's economic per- and jobs for women. Covid-19 created a positive formance and global financial stability, increasing the demand shock which set accelerated female partic- potential for widespread implications. Despite these ipation in the labor market. For the rest of the GCC uncertainties, the GCC is demonstrating promising and MENA region, important lessons can be drawn signs of socio-economic resilience, underpinned by on advancing female labor force participation. xiv GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION Key Take Away Charts: Recent Economic Trends in the GCC Economies Following stellar economic growth in 2022, regional momentum …the non-oil sector's robust growth continues to drive economic appears to be decelerating… activity in 2023, cushioning contraction in the oil sector 8 14 7 11 6 8 Growth, percent, SA GCC growth, sa, percent 5 5 4 2 3 –1 2 –4 1 –7 2021 2022 2023:Q1 2023:Q2 0 GCC – Non-oil GCC – Oil 2021 2022 2023:Q1 2023:Q2 …as a result of tight monetary conditions and a fall in global Inflation is moderating following a spike in 2022… commodity prices 9 140 500 8 450 120 7 400 6 100 350 US$/Mil.BTU; US$/Barrel CPI (y/y percent change) 5 80 300 4 US$/MT 250 3 60 200 2 1 40 150 0 100 20 –1 50 –2 0 0 21:M7 21:M11 22:M3 22:M7 22:M11 23:M3 23:M7 20:M9 21:M3 21:M9 22:M3 22:M9 23:M3 23:M9 BHR KWT OMN QTR KSA UAE Natural gas, EU Crude oil, Brent Wheat, US (rhs) High oil receipts strengthened GCC fiscal positions in 2022, but …with similar pattern reflected on the external balance are weakening during H1-2023… position in the GCC 6 18 16 Fiscal balance, percent of annual GDP, SA Current account balance, percent of 14 3 12 annual GDP, SA 10 8 0 6 4 2 –3 0 2021 2022 2023:Q1 2023:Q2 2021 2022 2023:Q1 2023:Q2 GCC (lhs) KSA UAE QTR OMN GCC (lhs) QTR BHR KSA Executive Summary xv ‫موجز تنفيذي‬ ‫إىل انخفاض عائدات النفط والسياسة املالية التوسعية‪ .‬وفيام حافظت‬ ‫بعض الدول عىل فائضها املايل‪ ،‬ولو أنه قد تقلص‪ ،‬نرى دوالً أخرى قد‬ ‫انتقلت إىل حالة العجز‪ .‬وقد ارتفعت نسب الدين العام خالل الجائحة‬ ‫عد األداء القوي للعام ‪ ،2022‬بدأت إشارات تظهر ضعف‬ ‫النشاط االقتصادي يف النصف األول من عام ‪ .2023‬شهدت‬ ‫منطقة دول مجلس التعاون الخليجي تباطؤا ً يف النشاط‬ ‫ب‬ ‫إىل مستويات قياسية‪ ،‬لكنها عادت إىل مسار هبوطي منذ ذلك الحني‪ ،‬مع‬ ‫االقتصادي خالل األشهر الستة األوىل من عام ‪ 2023‬بعد النمو القوي الذي‬ ‫استقرار هذه النسب يف النصف األول من عام ‪ 2023‬يف عدد من دول‬ ‫وصل إىل ‪ 7.4‬يف املائة يف عام ‪ .2022‬ويعود هذا التباطؤ يف املقام األول‬ ‫املنطقة‪ .‬ويف الوقت نفسه‪ ،‬تقلص فائض امليزان الخارجي اإلقليمي خالل‬ ‫إىل اتفاق منظمة أوبك‪ +‬عىل خفض إنتاج النفط وإىل الظروف االقتصادية‬ ‫النصف األول من عام ‪ 2023‬عىل خلفية ضعف العائدات النفطية‪ ،‬كام‬ ‫العاملية الصعبة‪ .‬وعىل الرغم من املعاكسات‪ ،‬فقد أظهرت األنشطة غري‬ ‫ال تزال صادرات السلع غري النفطية متدنية يف العديد من دول مجلس‬ ‫النفطية مرونة ومنوا ً قوياً مدعوماً باالستهالك الخاص واالستثامرات‬ ‫التعاون الخليجي‪ ،‬مام يؤكد الحاجة إىل مزيد من جهود التنويع يف‬ ‫واإلنفاق الحكومي التوسعي‪.‬‬ ‫محفظة الصادرات غري النفطية‪.‬‬ ‫يبدو أن اإلصالحات الهيكلية املستمرة وجهود التنويع بدأت‬ ‫وبالنظر إىل املستقبل‪ ،‬من املتوقع أن يتباطأ النمو االقتصادي‬ ‫تؤيت مثارها؛ ومع ذلك‪ ،‬ال تزال هناك حاجة إىل القيام باملزيد‪ .‬يشري‬ ‫يف دول مجلس التعاون الخليجي إىل ‪ 1‬يف املائة يف عام ‪ ،2023‬مدفوعاً‬ ‫التحسن يف أداء القطاعات غري النفطية يف جميع دول مجلس التعاون‬ ‫حد كبري بتأثري االنكامش يف قطاع النفط الذي يُتوقع أن يرتاجع بنسبة‬ ‫إىل ٍ‬ ‫الخليجي إىل أن جهود التنويع االقتصادي تؤيت مثارها وتضعف الروابط‬ ‫‪ 3.9‬يف املائة‪ ،‬يف أعقاب تخفيضات إنتاج أوبك‪ +‬من النفط والتحديات‬ ‫القامئة بني القطاعني النفطي وغري النفطي‪ .‬وينعكس هذا التقدم بوضوح‬ ‫االقتصادية العاملية‪ .‬ويُتوقع أن تواصل القطاعات غري النفطية يف املنطقة‬ ‫من خالل منو فرص العمل وتعزيز ديناميكيات سوق العمل‪ ،‬مبا يف ذلك‬ ‫ة باالستهالك الخاص‬ ‫مسار منوها‪ ،‬حيث ستنمو بنسبة ‪ 3.9‬يف املائة‪ ،‬مدعوم ً‬ ‫زيادة معدالت مشاركة املرأة يف القوى العاملة وتحسن حركة اليد‬ ‫املستدام‪ ،‬واالستثامرات االسرتاتيجية الثابتة‪ ،‬والسياسات املالية الحكومية‬ ‫العاملة‪ .‬وعىل الرغم من التقدم املحرز عىل صعيد اإلصالحات الهيكلية يف‬ ‫التوسعية‪ .‬ومن املتوقع أن تشهد دول مجلس التعاون الخليجي معدل‬ ‫غالبية دول مجلس التعاون الخليجي‪ ،‬إال أنه مثة حاجة إىل بذل املزيد من‬ ‫تضخم منخفض (‪ 2.8‬يف املائة) يف عام ‪ 2023‬وفائضاً مالياً محدودا ً (‪0.8‬‬ ‫الجهود للتخفيف من تأثري تقلب أسعار النفط العاملية وتعزيز استقرار‬ ‫يف املائة من الناتج املحيل اإلجاميل) بسبب تدهور عائدات النفط‪ ،‬مع‬ ‫االقتصاد الكيل‪.‬‬ ‫توقع حدوث انتعاش طفيف يف الفرتة بني ‪ 2024‬و‪ .2025‬وتختلف أوضاع‬ ‫يبدو أن الضغوط التضخمية آخذة يف الرتاجع مقابل تشدد يف‬ ‫حسابات املالية العامة بني دول مجلس التعاون الخليجي لتعكس تدابري‬ ‫السياسات النقدية‪ .‬بعد ارتفاع معدل التضخم يف عام ‪ 2022‬إىل ‪ 3.6‬يف‬ ‫ضبط املالية لكل دولة عىل حدة‪ .‬وباملثل‪ ،‬من املتوقع أن يشهد امليزان‬ ‫املائة‪ ،‬نراه يتجه يف جميع أنحاء املنطقة نحو مستويات معتدلة خالل‬ ‫الخارجي اإلقليمي فائضاً (‪ 9.6‬يف املائة من إجاميل الناتج املحيل)‪ ،‬مدفوعاً‬ ‫األشهر التسعة األوىل من عام ‪ 2023‬مدعوماً بقوة الدوالر األمرييك‪،‬‬ ‫بعائدات النفط العالية‪ ،‬مع بقاء سياسة تنويع الصادرات غري النفطية‬ ‫وتراجع كلفة الواردات‪ ،‬والسياسات النقدية االنكامشية‪.‬‬ ‫مركزية لتحقيق املرونة االقتصادية عىل املدى الطويل‪.‬‬ ‫واجه ميزان املالية العامة وامليزان الخارجي تحديات خالل‬ ‫تواجه اآلفاق االقتصادية لدول مجلس التعاون الخليجي‬ ‫النصف األول من عام ‪ .2023‬فقد تقلص الفائض املايل يف منطقة دول‬ ‫تحديات بسبب املخاطر الناجمة عن عدم االستقرار الجيوسيايس‪،‬‬ ‫مجلس التعاون الخليجي عموماً خالل النصف األول من عام ‪( 2023‬‬ ‫وأهمها التطورات أو التصعيد يف الرصاع بني حامس وإرسائيل‪،‬‬ ‫د ذلك‬‫حيث بلغ ‪ 4.9‬يف املائة من إجاميل الناتج املحيل يف عام ‪ ،)2022‬ومر ّ‬ ‫‪xvii‬‬ ‫العربية السعودية ارتفاعاً غري مسبوق يف مشاركة املرأة يف القوى العاملة‬ ‫والخالفات املحتملة داخل منظمة أوبك‪ ،+‬وطول فرتة بقاء السياسة‬ ‫منذ العام ‪( 2017‬من ‪ 17.4%‬يف عام ‪ 2017‬اىل ‪ 36%‬يف عام ‪.)2023‬‬ ‫النقدية االنكامشية والتي تهدد منو القطاعات غري النفطية‪ .‬إضاف ً‬ ‫ة إىل‬ ‫وجاء ذلك نتيجة عوامل حاسمة عدة‪ :‬أوالً‪ ،‬تم تنفيذ اصالحات قانونية‬ ‫ذلك‪ ،‬ترتبط اآلفاق االقتصادية للمنطقة بشكل وثيق بعوامل خارجية‬ ‫واطالق عدة برامج‪ ،‬مام مهد الطريق النخراط املرأة يف سوق العمل‪ .‬ثانياً‪،‬‬ ‫مثل األداء االقتصادي يف الصني واالستقرار املايل العاملي‪ ،‬مام يزيد من‬ ‫التواصل والتوعية الفعالة عن أهمية انضامم املرأة إىل سوق العمل‪ ،‬والتي‬ ‫احتامالت حدوث عواقب واسعة النطاق‪ .‬وعىل الرغم من حاالت عدم‬ ‫ساندت التغري االيجايب لألعراف االجتامعية‪ .‬ثالثاً‪ ،‬أدت التغريات يف الهيكل‬ ‫اليقني هذه‪ ،‬ت ُظهر دول مجلس التعاون الخليجي بوادر إيجابية عىل‬ ‫االقتصادي إىل توليد الطلب الرضوري عىل اليد العاملة‪ .‬وقد كان دور‬ ‫ة بإصالحات هيكلية‬ ‫صعيد املرونة االجتامعية واالقتصادية‪ ،‬مدعوم ً‬ ‫جائحة كوفيد‪ -19‬بارزا ً يف احداث صدمة إيجابية للطلب عىل اليد العاملة‬ ‫إيجابية يف السياسات الداخلية‪ ،‬مبا يف ذلك تلك التي تركز عىل تعزيز‬ ‫للسيدات السعوديات وحافزا ً أساسياً النطالق التحول الرسيع‪ .‬وميكن‬ ‫مشاركة املرأة يف القوى العاملة وهو موضوع يتم مناقشته باستفاضة يف‬ ‫استخالص دروس مهمة من هذه التجربة حول كيفية تعزيز مشاركة املرأة‬ ‫القسم الخاص يف هذا التقرير‪.‬‬ ‫يف القوى العاملة لباقي دول مجلس التعاون الخليجي ومنطقة الرشق‬ ‫القسم الخاص من التقرير‪ :‬اإلصالحات الهيكلية وتغري األعراف‬ ‫األوسط وشامل أفريقيا عموماً‪.‬‬ ‫االجتامعية لزيادة مشاركة املرأة يف القوى العاملة‪ .‬شهدت اململكة‬ ‫‪xviii‬‬ ‫‪GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION‬‬ ‫رسوم بيانية عن االستنتاجات الرئيسية‪ :‬أحدث االتجاهات االقتصادية يف دول مجلس التعاون الخليجي‬ ‫‪ ...‬وﻳﺴﺘﻤﺮ اﻟﻨﻤﻮ اﻟﻘﻮي ﻟﻠﻘﻄﺎﻋﺎت ﻏ اﻟﻨﻔﻄﻴﺔ ﰲ دﻓﻊ اﻟﻨﺸﺎط اﻻﻗﺘﺼﺎدي ﰲ‬ ‫ﺑﻌﺪ اﻟﻨﻤﻮ اﻻﻗﺘﺼﺎدي اﻟﻘﻮي ﰲ ﻋﺎم ‪ ،2022‬ﻳﺒﺪو أن زﺧﻢ اﻟﻨﻤﻮ‬ ‫ﻋﺎم ‪ ،2023‬وﺗﺨﻔﻴﻒ اﻻﻧﻜ ش ﰲ اﻟﻘﻄﺎع اﻟﻨﻔﻄﻲ‪.‬‬ ‫اﻻﻗﺘﺼﺎدي ﺑﺪأ ﻳﺘﺒﺎﻃﺄ‪...‬‬ ‫‪14‬‬ ‫‪8‬‬ ‫‪11‬‬ ‫‪7‬‬ ‫اﻟﻨﻤﻮ‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ‪ ،‬ﻣﻌﺪﻟﺔ ﻣﻮﺳﻤﻴﺎ ً‬ ‫اﻟﻨﻤﻮ ﰲ دول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ‪،‬‬ ‫‪8‬‬ ‫‪6‬‬ ‫ﻣﻌﺪل ﻣﻮﺳﻤﻴﺎ ً‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ‬ ‫‪5‬‬ ‫‪5‬‬ ‫‪2‬‬ ‫‪4‬‬ ‫‪–1‬‬ ‫‪3‬‬ ‫‪–4‬‬ ‫‪2‬‬ ‫‪–7‬‬ ‫‪1‬‬ ‫‪2021‬‬ ‫‪2022‬‬ ‫‪2023:Q1‬‬ ‫‪2023:Q2‬‬ ‫دول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ ‪ -‬ﻏ ﻧﻔﻄﻲ‬ ‫دول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ ‪ -‬ﻧﻔﻄﻲ‬ ‫‪0‬‬ ‫‪2021‬‬ ‫‪2022‬‬ ‫‪2023-Q1‬‬ ‫‪2023-Q2‬‬ ‫‪ ...‬ﻧﺘﻴﺠ ً‬ ‫ﺔ ﻟﻠﺴﻴﺎﺳﺔ اﻟﻨﻘﺪﻳﺔ اﻻﻧﻜ ﺷﻴﺔ واﻧﺨﻔﺎض أﺳﻌﺎر اﻟﺴﻠﻊ اﻟﻌﺎﳌﻴﺔ‬ ‫ﻛ ان اﻟﺘﻀﺨﻢ ﻳﱰاﺟﻊ ﺑﻌﺪ ارﺗﻔﺎﻋﻪ ﰲ ﻋﺎم ‪...2022‬‬ ‫‪140‬‬ ‫‪500‬‬ ‫‪9‬‬ ‫‪450‬‬ ‫‪8‬‬ ‫اﻟﻨﻤﻮ ﰲ دول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ‪،‬‬ ‫‪120‬‬ ‫اﻟﻨﻤﻮ‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ‪ ،‬ﻣﻌﺪﻟﺔ ﻣﻮﺳﻤﻴﺎ ً‬ ‫‪400‬‬ ‫‪7‬‬ ‫ﻣﻌﺪل ﻣﻮﺳﻤﻴﺎ ً‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ‬ ‫‪100‬‬ ‫‪350‬‬ ‫‪6‬‬ ‫‪5‬‬ ‫‪80‬‬ ‫‪300‬‬ ‫‪4‬‬ ‫‪250‬‬ ‫‪60‬‬ ‫‪3‬‬ ‫‪200‬‬ ‫‪2‬‬ ‫‪40‬‬ ‫‪150‬‬ ‫‪1‬‬ ‫‪100‬‬ ‫‪0‬‬ ‫‪20‬‬ ‫‪50‬‬ ‫‪–1‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪–2‬‬ ‫‪20:M9 21:M3 21:M9 22:M3 22:M9 23:M3 23:M9‬‬ ‫‪21:M7 21:M11 22:M3‬‬ ‫‪22:M7 22:M11 23:M3‬‬ ‫‪23:M7‬‬ ‫ﻧﻔﻂ ﺧﺎم‪ ،‬ﺑﺮﻧﺖ‬ ‫ﻗﻤﺢ‪ ،‬اﻟﻮﻻﻳﺎت اﳌﺘﺤﺪة )‪(rhs‬‬ ‫اﻟﺒﺤﺮﻳﻦ‬ ‫اﻟﻜﻮﻳﺖ‬ ‫ﻋ ن‬‫ُ‬ ‫ﻏﺎز ﻃﺒﻴﻌﻲ‪ ،‬اﻻﺗﺤﺎد اﻷورو‬ ‫ﻗﻄﺮ‬ ‫اﳌﻤﻠﻜﺔ اﻟﻌﺮﺑﻴﺔ اﻟﺴﻌﻮدﻳﺔ‬ ‫اﻹﻣﺎرات اﻟﻌﺮﺑﻴﺔ اﳌﺘﺤﺪة‬ ‫‪ ...‬ﻣﻊ ﻂ ﻣ ﺛﻞ ﻳﻨﻌﻜﺲ ﻋﲆ وﺿﻊ اﳌﻴﺰان اﻟﺨﺎرﺟﻲ ﰲ دول ﻣﺠﻠﺲ‬ ‫ﻋﺰزت إﻳﺮادات اﻟﻨﻔﻂ اﳌﺮﺗﻔﻌﺔ اﻷوﺿﺎع اﳌﺎﻟﻴﺔ ﻟﺪول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ‬ ‫اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ‪.‬‬ ‫ﰲ ﻋﺎم ‪ ،2022‬ﻟﻜﻨﻬﺎ ﺷﻬﺪت ﺗﺮاﺟﻌﺎً ﺧﻼل اﻟﻨﺼﻒ اﻷول ﻣﻦ ﻋﺎم ‪...2023‬‬ ‫‪18‬‬ ‫‪6‬‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ اﻟﺴﻨﻮي‪ ،‬ﻣﻌﺪل ﻣﻮﺳﻤﻴﺎ ً‬ ‫اﳌﻴﺰان اﳌﺎﱄ‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ ﻣﻦ اﻟﻨﺎﺗﺞ اﳌﺤﲇ‬ ‫رﺻﻴﺪ اﻟﺤﺴﺎب اﻟﺠﺎري‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ ﻣﻦ‬ ‫‪16‬‬ ‫اﻹﺟ ﱄ اﻟﺴﻨﻮي‪ ،‬ﻣﻌﺪل ﻣﻮﺳﻤﻴﺎ ً‬ ‫‪14‬‬ ‫‪12‬‬ ‫‪3‬‬ ‫‪10‬‬ ‫‪8‬‬ ‫‪6‬‬ ‫‪0‬‬ ‫‪4‬‬ ‫‪2‬‬ ‫‪0‬‬ ‫‪–3‬‬ ‫‪2021‬‬ ‫‪2022‬‬ ‫‪2023:Q1‬‬ ‫‪2023:Q2‬‬ ‫‪2021‬‬ ‫‪2022‬‬ ‫‪2023:Q1‬‬ ‫‪2023:Q2‬‬ ‫دول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ‬ ‫ﻗﻄﺮ‬ ‫دول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ )‪(lhs‬‬ ‫اﳌﻤﻠﻜﺔ اﻟﻌﺮﺑﻴﺔ اﻟﺴﻌﻮدﻳﺔ‬ ‫اﻟﺒﺤﺮﻳﻦ‬ ‫اﳌﻤﻠﻜﺔ اﻟﻌﺮﺑﻴﺔ اﻟﺴﻌﻮدﻳﺔ‬ ‫اﻹﻣﺎرات اﻟﻌﺮﺑﻴﺔ اﳌﺘﺤﺪة‬ ‫ﻋ ن‬‫ُ‬ ‫ﻗﻄﺮ‬ ‫موجز تنفيذي‬ ‫‪xix‬‬ 1 RECENT ECONOMIC DEVELOPMENTS Regional GDP is losing steam after a strong in oil GDP growth of 12.1 percent. Similarly, and sup- performance in 2022 ... ported by post-pandemic recovery in consumption and investments, the non-oil regional GDP also reg- Following stellar growth in 2022, signs of decel- istered strong growth of 4.8 precent during that year. erating economic activity emerged in the GCC However, during the first couple of months of 2023, the during the first half of 2023. The boom in commod- region started to experience an economic slowdown ity prices, coupled with increased oil production in (Figure 3), primarily driven by contracting oil activities 2022 and strong non-hydrocarbon activities, resulted as a result of strategic and consecutive decisions by in robust regional growth of 7.4 percent. However, in OPEC+ to cut production and stabilize global oil prices 2023, the region started experiencing an economic (Figure 4). These cuts were further deepened by Saudi slowdown (Figure 1) driven by oil production cuts Arabia’s decision to voluntarily reduce oil production reflecting OPEC+ tighter oil quotas and global and by an additional 1 mbpd from July 2023 until the end regional economic challenges, including tightening of year. Despite the slowdown in the regional hydro- of global monetary conditions and, most recently, the carbon activities, non-hydrocarbon sectors continued conflict in the Middle East. Private consumption and to show resilience and robust growth during H1-2023 investment contributed to economic growth in 2022 suggesting that diversification efforts are paying-off and remain key drivers of GCC’s economic develop- and bearing fruit (Figure 5). High-frequency indicators, ment in the H1-2023 (Figure 2). such as the PMI index (Figure 6), also confirm non-oil While both the hydrocarbon and non-hydro- economic expansion through H1-2023 albeit signs of carbon sectors supported robust regional growth weakness are emerging in the most recent months. in 2022, the hydrocarbon sector led the economic Robust performance in non-hydrocarbon sectors— slowdown in H1-2023. High oil prices witnessed in particularly construction, retail, and tourism together the aftermath of the war in Ukraine and the loosen- with ongoing structural reforms (Box 1)—have partially ing of OPEC+ quotas during most of 2022 resulted offset the downturn and supported overall GDP. In 1 Regional GDP is losing steam after FIGURE 1 •  FIGURE 2 • …with consumption and investment strong performance in 2022… continuing to be the key drivers of economic activity in H1-2023 8 10 7 8 6 Contribution to growth, percent 6 GCC growth, sa, percent 5 4 4 2 3 0 –2 2 –4 1 –6 2020 2021 2022 2023e 0 2021 2022 2023:Q1 2023:Q2 Private Consumption Govt. Consumption Source: Haver Analytics and WB staff calculations. Fixed Investment Net Exports Note: Quarterly data calculated as weighted average of available data (Q1:2023 include KSA, UAE, QTR, OMN, BHR and Q2:2023 include KSA, OMN, BHR). Source: WB Macro-Poverty Outlook AM23 and WB staff calculations. FIGURE 3 • All GCC countries are showing weaker …driven primarily by contraction FIGURE 4 •  growth during H1-2023… in oil sector activities in line with OPEC+ agreements 14 20,000 30 12 19,000 10 20 18,000 Real GDP Growth (y/y), sa 8 10 Crude Oil (mn/d) Growth, percent 17,000 6 16,000 0 4 15,000 2 –10 14,000 0 –20 –2 13,000 –4 12,000 –30 22:Q1 22:Q2 22:Q3 22:Q4 23:Q1 23:Q2 Apr-21 Sep-21 Feb-22 Jul-22 Dec-22 May-23 BHR QTR KSA UAE OMN Growth y/y Mb/d Source: Haver Analytics and World Bank staff calculations. Source: U.S. Energy Information Administration and World Bank staff calculations. Note: KWT quarterly data available only until 2020. Notes: Sum of KSA, UAE, KWT, BHR, and OMN. addition, increased migration along with capital inflow The outbreak of conflict in the Middle East in from Russia to UAE are boosting real estate sector early Oct 2023 marks a new regional development. and economic activity. However, the headwinds in With the escalation of military operations, Brent oil prices the form of reduced private sector credit growth due increased by more than $3 per barrel (4 percent) during to tighter monetary conditions indicate slower con- the first week of the confrontation. Fears of escalating sumption in some countries which could dampen non- tension or prolonged confrontation will have serious eco- hydrocarbon growth. nomic spillovers on the region and the global economy. 2 GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION FIGURE 5 • Despite contracting oil sector, the FIGURE 6 • . …with the PMI still in expansion non-oil sectors showing resilience territory in H1-2023 and cushioning the downturn… 80 14 75 11 PMI: Total Economy Output (Index) 70 8 Growth, percent, SA 65 5 60 2 55 –1 Above 50 = expansion; 50 –4 Below 50 = contraction 45 –7 2021 2022 2023:Q1 2023:Q2 40 21:M7 21:M12 22:M5 22:M10 23:M3 23:M8 GCC – Non-Oil GCC – Oil QTR KSA UAE 50 Source: Haver and World Bank staff calculations. Note: Quarterly data calculated as weighted average of available data (Q1:2023 include Source: S&P Global Purchasing Managers Survey. KSA, UAE, QTR, OMN, BHR and Q2:2023 include KSA, OMN, BHR). Note: Data for UAE, OMN, BHR is not available. FIGURE 7 • Meanwhile, inflation across the GCC FIGURE 8 • …as well as international commodity region started to moderate… prices 9 140 500 8 450 120 7 400 6 US$/Mil.BTU; US$/Barrel CPI (y/y percent change) 100 350 5 80 300 US$/MT 4 250 3 60 200 2 1 40 150 0 100 20 –1 50 –2 0 0 21:M7 21:M11 22:M3 22:M7 22:M11 23:M3 23:M7 20:M9 21:M3 21:M9 22:M3 22:M9 23:M3 23:M9 BHR KWT OMN QTR KSA UAE Natural gas, EU Crude Oil, Brent Wheat, US (rhs) Source: Haver Analytics, IMF IFS database, and WB staff calculations. Source: Haver Analytics, IMF Commodity Prices database. After a pickup in 2022, inflationary pressures led to increases in energy and food prices in 2022 across the region are moderating (Figure 8), pushing regional inflation to 3.6 percent. During H1-2023, inflationary pressures eased in most Regional inflationary pressures are moderating GCC countries supported by strong a U.S. dollar,1 after a rise in 2022 resulting from robust eco- nomic recovery and high global commodity prices 1 All GCC currencies are pegged to the U.S. dollar, except (Figure 7). Increased demand coupled with commod- for Kuwait which is pegged to a basket of currencies that ity shortages, exacerbated by the war in Ukraine, is dominated by the U.S. dollar. Recent Economic Developments 3 FIGURE 9 • Regional average inflation continues FIGURE 10 • …while banking system across the to remain well-below peers… region remains well-capitalized and liquid. 10 25 12 9 20 10 8 8 Percent (eop) Percent (eop) CPI (y/y percent change) 7 15 6 6 10 4 5 5 2 4 3 0 0 2021 2022 2021 2022 2021 2022 23:Q2 23:Q2 23:Q2 2 KSA UAE Kuwait 1 0 Regulatory Capital to Risk-weighted Assets GCC AE USA EU Liquid Assets to Total Assets Nonperforming Loans to Total Gross Loans (rhs) 2022 2023e Source: Haver Analytics, IMF FSI database. Source: Haver Analytics, IMF WEO database, and WB staff calculations. Note: Data for BHR, QRT, and OMN is not available. falling global commodity prices, and the generous sub- domestic reserve requirements, as part of their exten- sidy policy implemented in most GCC countries. These sive monetary policy strategies. Furthermore, the factors have shielded businesses and households banking system in the GCC is healthy, well-capital- from a full passthrough of high import prices keeping ized, and liquid (Figure 10). Monetary authorities have GCC regional inflation rate lower than peers (Figure 9). also enhanced monitoring measures to safeguard the Global energy prices jumped in the after- banking system, including strengthening of regulatory math of the conflict in the Middle East. It is still not framework, advancements in the National AML/CFT clear yet if this hike in energy prices will persist. The strategy, and enhanced monitoring in accordance higher prices were not driven by supply disruptions with the Financial Action Task Force guidelines. but by the fear from these disruptions materializing if the conflict expands regionally or is prolonged. Lower oil receipts are narrowing the fiscal Since March 2022, the central banks of surplus in 2023… GCC have raised interest rates following the tight- ening monetary policy implemented by the U.S. After registering a fiscal surplus of 4.9 percent of Federal Reserve Board (FED). Following the FED GDP in 2022, the first since 2014, the regional monetary tightening and to maintain the pegged surplus narrowed in H1-2023 (Figure 11). During exchange rate, the Central Banks of the GCC coun- 2022, the positive fiscal performance in the region tries undertook multiple policy rate adjustments, push- was not only driven by higher oil receipts but also sup- ing the base rate upwards. Tighter monetary stance in ported by the ongoing development in non-oil activi- the GCC countries have supported keeping inflation ties and fiscal consolidation efforts. Meanwhile, on the rates subdued suggesting that monetary policy trans- back of lower oil receipts during H1-2023 accompa- mission into the domestic economy might be faster nied by loose fiscal policy in most countries to support and tighter than in other countries, such as the United the non-oil sectors, the fiscal position of the GCC coun- States. In conjunction with adjustments to policy inter- tries has deteriorated. However, and depending on the est rates, GCC countries (Saudi Arabia, UAE, Oman, Qatar, and Bahrain)2 have employed other monetary 2 IMF, Regional Economic Outlook, Middle East and Central policy instruments, encompassing both foreign and Asia, May 2023. 4 GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION FIGURE 11 • Deteriorating fiscal positions during FIGURE 12 • …despite the economic downturn, H1-2023 as a result of falling oil public debt remains stable for most receipts and loose fiscal policy… countries and lower than average MENA level. 6 140 Fiscal Balance, percent of annual GDP, SA Debt stock, percent of GDP 120 100 3 80 60 40 20 0 0 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2023e 2023e 2023e 2023e 2023e 2023e BHR OMN QTR UAE KSA KWT –3 2021 2022 2023:Q1 2023:Q2 MENA-2021 GCC-2021 MENA-2022 GCC-2022 GCC (lhs) KSA UAE QTR OMN MENA-2023 GCC-2023 Source: Haver Analytics, WB Macro-Poverty Outlook AM 2023, and World Bank staff Source: WB Macro-Poverty Outlook, AM 2023. calculations. persistence of the recent hike in energy prices as a for most countries in the region (Figure 12). However, result of the conflict in the Middle East, revenue wind- in Bahrain, the public debt persists at high levels, and falls could ease fiscal hardships for GCC countries. potential decline in oil prices may hamper budgetary The fiscal position varies among GCC coun- balance efforts. In Oman, even with a 6 percent drop tries during H1-2023. The fiscal deficit in Bahrain in budgetary revenues in H1-2023, the overall fiscal narrowed due to the government’s commitment to position transitioned into a surplus— about 1.6 percent mobilizing higher non-oil revenues and the imple- of the GDP. This trend will likely further support the mentation of additional fiscal measures. The fiscal reduction in the debt-to-GDP ratio, though at a decel- balances for both Saudi Arabia and Kuwait shifted erated rate. For Saudi Arabia, financing has been from surpluses recorded in 2022 to deficits due to secured via a US$10 billion sovereign bond issuance decrease oil revenue combined with loose fiscal pol- and enhanced dividends from Aramco with potential icies. On the other side, UAE, Qatar, and Oman have further share sale by year-end similar to the 2019 IPO. maintained their fiscal surpluses, however, these sur- pluses are narrowing to reflect softening oil prices and lower oil production levels. Fiscal adjustment The GCC region’s external balance measures under Oman’s MTFP are positively influenc- rebounded in 2022 but faced a ing the fiscal position while declines in Qatar’s public downturn in H1-2023. expenditures in the aftermath of the 2022 World Cup is creating fiscal space in the budget. Elevated commodity prices and output levels Accordingly, financing needs reflect differ- strengthened regional external surplus in 2022. ent outcomes among GCC countries. Although the After historically low oil prices (below US$40 pb) public debt-to-GDP ratios expanded significantly dur- resulted in a recorded large deficit, the regional exter- ing the pandemic, by 2021 it began to decline for all nal balance witnessed strong surpluses which peaked GCC countries. The robust economic rebound in 2022 in 2022 at 15.7 percent of GDP. However, lower oil coupled with enhanced fiscal positions across the receipts driven by lower oil production and prices nar- region bolstered this trend. In H1-2023, and despite rowed the surplus during H1-2023 (Figure 13). This is the economic downturn, public debt remains stable especially the case in GCC countries more dependent Recent Economic Developments 5 FIGURE 13 • Current account surplus is …while non-oil merchandise exports FIGURE 14 •  narrowing at the back of lower oil across the GCC region continue to receipts… lag, several countries have shown progress in recent years 18 Current Account balance, percent of annual GDP, SA 40 16 14 35 12 30 25 Percent of GDP 10 8 20 6 15 4 10 2 5 0 0 2021 2022 2023:Q1 2023:Q2 2002 2005 2008 2011 2014 2017 2020 2023e GCC (lhs) QTR BHR KSA KWT UAE BHR OMN KSA QTR Source: Haver Analytics and World Bank staff calculations. Source: National Authorities, WITS, IMF WEO, and WB staff calculations. on hydrocarbon exports like Saudi Arabia, Kuwait mies. All GCC countries have made varying progress and Qatar. In 2022, both Bahrain and Oman had in diversifying their economies and promoting social improvements in their external balances, and these advancement. This was reflected in the sustained positive trends continued into H1-2023. Bahrain ben- growth of the non-oil sector across the region in 2022, efited from elevated prices in both the hydrocarbon which persisted during the economic downturn in oil and non-hydrocarbon sectors resulting in a surplus produciton in H1-2023. For instance, Saudi Arabia’s 15.4 percent of GDP in 2022, while Oman experi- oil GDP growth declined to 1.4 and –0.4 percent in enced a shift in its current account position, from a Q1- and Q2-2023 respectively, however, the non- deficit of 4.9 percent of GDP in 2021 to a surplus of oil sector, a key contributor for job creation, reported 6.2 percent of GDP in 2022, with this favorable trend strong growth reaching 5.1 and 4.2 percent in Q1- and persisting during H1-2023. Q2-2023 respectively. Non-oil merchandise exports across GCC Diversification and the development of non- region continue to lag. While the substantial oil sectors significantly impacted the creation of improvement in the external balances of the GCC over employment opportunities across sectors and the past years is attributed to the hydrocarbon sector, geographic regions within GCC. The labor market several countries in the region have also shown prog- in the region continues to strengthen, with business ress in non-oil merchandise exports (Figure 14) and confidence and hiring activity reverting to pre-pan- further diversifying their exports portfolio. The signing demic levels. In Saudi Arabia the private sector work- of free trade agreements with major Asian and African force has grown steadily, reaching 2.6 million in early markets is anticipated to further boost non-oil exports 2023. This expansion coincides with overall increases and enhance external balance positions. in labor force participation, employment-to-population ratio (Figure 15), and a decrease in unemployment. Diversification efforts are paying-off, but more With the phasing out of the kafala system, labor mobil- reforms are still needed... ity for migrant workers improved in line with ongoing labor reforms. Furthermore, as of 2022, migrant work- The GCC countries have shown notable improve- ers in many GCC countries could leave their host coun- ments in the performance of their non-oil econo- try without their employer’s explicit permission, yet job 6 GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION FIGURE 15 • Employment-to-population ratio FIGURE 16 • . …while progress has been made on across GCC countries is higher than the non-oil fiscal position in MENA region… –28 22 120 –32 Employment-to-population ratio, 2022 100 –36 18 80 –40 60 –44 14 –48 40 –52 20 –56 10 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 KSA OMN BHR KWT UAE QTR Female Male Total Non-Oil revenue/Non-Oil GDP (rhs) Mena-Female Mena-Male Mena-Total Non-Oil Fiscal Balance Source: ILO and WB staff calculations. Source: IMF and World Bank staff calculations. stability remains a concern. In addition, governments The effective implementation of these reforms not across the region notably enhance human capital only foster for investment and job creation across the development and women’s employment, leading to sectors but also diminishes the region’s vulnerability female labor force participation rates surpassing the to global oil price fluctuations as governments diver- MENA average with UAE, Kuwait, Qatar, and Bahrain sify their budgetary revenue sources. Progress made leading and Saudi Arabia observing a significant jump in the non-oil fiscal stance (Figure 16) has helped to from 18 percent in 2017 to 36 percent in Q1-2023. The broaden the revenue base, enhance the non-oil fis- rise of Saudi women in the labor force is discussed in cal position by generating new sources of public rev- more detail in the Special Focus section of this report. enue, and reduce reliance on oil receipts. Against Structural reforms have advanced signifi- this background, the Gulf Economic Update mon- cantly. Prior efforts in structural reforms across the itors structural reforms implemented in recent quar- GCC region are now reflected in the positive progres- ters and tracks continued diversification efforts. This sion of the GCC economies, paving the way for more edition emphasizes reforms that were enacted during competitive markets and a bolstered private sector. Q2- and Q3-2023, as detailed in Box 1. Recent Economic Developments 7 BOX 1. TRACKING RECENT STRUCTURAL REFORMS (FOCUSING ON Q2- AND Q3-2023) Saudi Arabia. KSA embarked on an ambitious national strategy to transform its industrial framework, aiming at attracting international investments and enhancing its export potential. Key international collaborations include a $10 billion oil refinery partnership with Pakistan and a $5.6 billion agreement with a Chinese electric car manufacturer. Domestically, Saudi’s Public Investment Fund has been at the forefront, launching projects including the Pharmaceutical Investment Company (Lifera) for economic diversification, the Saudi Tourism Investment Company (Asfar) to strengthen the tourism sector, and Kayanee, a women’s lifestyle company championing women’s empowerment in line with Vision 2030. In addition, Saudi Arabia launched “The Garage,” the Middle East’s largest startup district. UAE. Consistent with its strategic economic vision, the UAE has persistently altered its investment strategies to strengthen foreign partnerships, industrial capabilities, and environmental sustainability. Domestically, initiatives include the creation of $272 million food processing plants in Khalifa Economic Zones, which strengthen food security, while the launch of the UAE Carbon Alliance spotlight the nation’s focus on diversifying its economy and fostering innovation. Additionally, in regulatory shifts, the UAE has introduced new federal prosecution entities for economic crimes, established of the General Commercial Gaming Regulatory Authority, and modernized its gratuity framework for private-sector personnel. Qatar. Qatar has proactively prioritized its foreign investment strategies emphasizing both energy and diversified assets. Key initiatives include a long-term agreement with China for the annual supply of 4 million metric tons of LNG; QatarEnergy’s engagements, including a 10-year naphtha supply deal with Japan’s Marubeni Corporation, and a $3.9 billion pact with Korea’s Hyundai Heavy Industries for advanced LNG carriers. In diversified investments, the Qatar Investment Authority is noteworthy, with the $623 million purchase of New York City’s Park Lane hotel and a substantial $1 billion stake in Reliance Industries, India’s largest retail company. Kuwait. Limited progress in reforms may be largely attributed to the impasse between the government and parliament. Oman. The Sultanate has deepened its economic engagements both internationally and domestically. Key foreign initiatives include an anti- double taxation agreement with Russia, a 4-year deal by Oman LNG securing energy for Europe to supply 400,000 tons annually starting in 2026, strategic investments in a U.S. battery startup, and a joint fund with Spain’s COFIDES. Domestically, Hydrom has allocated $10 billion for green hydrogen projects, while the Port of Duqm collaborates with Evergreen Gulf Recycling Hub. In addition, SMEs are set to benefit from reduced fees in special zones and substantial tech and transport contract allocations. Bahrain. The Kingdom has taken strategic steps in foreign investments, including an $85 million investment by Al Waha Fund of Funds in a U.S.-focused Israeli digital health fund. The country has also strengthened economic ties through agreements with Japan and the UK ($1.3 billion). In terms of economic regulations, Bahrain has expanded cooperation with the U.S. through a strategic security and economic agreement, introduced new financing schemes for government housing, and implemented labor reforms to enhance protections for expatriate workers. Source: The Arab Gulf States Institute in Washington. 8 GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION 2 OUTLOOK AND RISKS The world economy continues to suffer from a Accordingly, the MENA region is expected series of destabilizing shocks to grow by 1.95 percent in 2023 and by 3.5 per- cent in 2024, much lower than the growth rate The global outlook continues to be fragile, due to of 6.0 percent recorded in 2022 (Figure 17). the prolonged impacts of simultaneous adverse The MENA average growth rate masks the stark dif- events: the pandemic, high inflation, tight mone- ferences across countries. Growth in oil export- tary policy, ongoing effects of the war in Ukraine, ers is expected to slow sharply to 1.5 percent this and most recently, the conflict in the Middle year, a deceleration from their remarkable 6.2 per- East. Following a 3.1 percent expansion in the pre- cent growth in 2022, reflecting lower oil prices and vious year, the global economic landscape is set to production. Meanwhile, developing oil importers are undergo a substantial slowdown in 2023, with growth expected to edge down to 3.6 percent in 2023, due to expected to dip to 2.1 percent.3 While the forecast high inflation, dollar shortages, and fiscal and mone- for 2023 is modestly higher than predicted in World tary policy tightening. Changes in real GDP per cap- Bank’s January 2023 forecasts,4 it remains weak by ita are arguably a more accurate measure of changes historical standards. The rise in central bank policy in living standards. Following a recovery of 4.3 per- rates to fight inflation continues to weigh on economic cent in 2022, growth in real GDP per capita for MENA activity. In advanced economies, resilient activity in is expected to decelerate to 0.4 percent and 1.9 per- the United States has been accompanied by weak- cent in 2023 and 2024, respectively. ness in the euro area. Activity in China remains weak. Despite production cuts, average oil The escalation of borrowing expenses in advanced prices for 2023 and 2024 have not returned to economies may result in financial disruptions in more vulnerable emerging markets and developing econo- 3 World Bank, Global Economic Prospects, June 2023. mies. The possibility of prolonged tight monetary con- 4 World Bank, Global Economic Prospects, Jan 2023. ditions could result in even weaker global growth. 5 World Bank, MENA Economics Update, Oct 2023. 9 FIGURE 17 • MENA’s growth is expected to slow FIGURE 18 • …while oil prices moderate to down sharply in 2023 and recover reflect uncertainties surrounding oil in 2024… markets 6 110 100 5 90 Growth rate, percent 4 80 USD per barrel 70 3 60 2 50 40 1 2022 2023 2024 30 2019 2020 2021 2022 2023 2024 World MENA Average Spot Crude Oil Source: Global Economic Prospects, June 2023; WB Macro-Poverty Outlook, AM 2023; and WB staff calculations. Source: Commodity Market Outlook, Sep 2023. the levels of 2022 (Figure 18). After averaging conflict on the GCC economic landscape, recent fluc- US$99.8pb in 2022, prices are expected to fall to tuations in energy prices underscore potential sup- US$85 and US$83pb in 2023 and 2024, respectively, ply risks rather than an immediate crisis (see Box 2). but will remain well above their 2016–21 average of However, any lengthening of the duration of the con- US$60pb. Despite OPEC+ consecutive oil production flict or expansion of its geographic range will increase cuts in 2022 and 2023, global demand is expected the magnitude of these risks. The probability of to be weak and is expected to counteract the effect upward revisions in crude prices emerges if these of the reduction in supply announced by OPEC+. Oil risks materialize. Finally, the risks associated with cli- production cuts amidst a slowdown in global eco- mate change are growing, as changing weather pat- nomic activity that is depressing oil prices will weight terns contribute to increasingly disruptive events, adversely on the economic activity of MENA oil export- such as heat waves and floods. ers. Among MENA oil importers, the ripple effects of the tightening of global financial conditions continue The outlook for the GCC region is positive in the to constrain economic activity. medium term although growth across the region The global outlook continues to be clouded is set to slow sharply in 2023 by uncertainty and further amplified by the recent conflict in the Middle East. The combination of slow- After the extraordinary performance of 2022, ing growth, persistently high inflation, and tight mon- the GCC region is projected to grow at a much etary conditions amid high levels of debt increases slower pace, with an emerging trend of decou- the risks of stagflation, financial strains, continued fis- pling of oil and non-oil economies. Regional GDP cal pressures, and weak investment in many coun- is expected to grow by 1.0 percent in 2023, 3.6 per- tries. Furthermore, activity in China could be weaker cent in 2024, and persist to 3.7 percent in 2025. The than expected due to stress in the real estate sec- weaker performance is driven primarily by lower oil tor. Geopolitical regional risks, which rose markedly GDP, which is expected to contract by 3.9 percent in after conflict in the Middle East, could increase further 2023 (Figure 19), to reflect OPEC+ production cuts and encompass a larger set of countries. While it is and the global economic slowdown. However, the too early to make predictions about the impact of the reduction in oil sector activities will be compensated 10 GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION BOX 2. RISKS TO REGIONAL OIL AND NATURAL GAS SUPPLIES Risks Oil Supply: Iran has been increasing its exports to China 128 89 since 2021 despite U.S. sanctions, which raised global supply and kept a lid on oil prices. If Iran is involved in Hamas’ attack, 123 there could be stricter enforcement of sanctions, or additional 88 sanctions; this would likely entail lower supply and higher prices. 118 Furthermore, the potential disruption of Saudi-Israeli peace talks, 87 Natural gas (sterling/therm) which could lead to an increase in Saudi oil supply in 2024 adds 113 Crude Oil ($/barrel) further complexity to the global oil supply. Currently, and within 108 86 the OPEC+ agreement, Saudi Arabia plans to limit oil supply until the end of 2024. Finally, in the event of the conflict expanding to involve other regional actors, heightened humanitarian concerns 103 85 and disruptions to Middle East oil routes would become more 98 prominent, especially since the majority of the oil supplies pass 84 through Strait of Hormoz. 93 Risks to Natural Gas Supply: Israel’s suspension of Chevron’s 83 Tamar offshore gas field operations, driven by security concerns 88 near Gaza, disrupts half of Israel’s gas production and impacts exports to Egypt. The European natural gas price surged 83 82 Oct-5 Oct-6 Oct-9 Oct-10 Oct-11 approximately 30 percent to €48 per MWh due to reduced supply and intensified risks (Figure Box 2). A more significant concern is UK: Crude Oil: Brent (rhs) the potential escalation of the conflict in the Middle East into a UK Natural Gas Futures (lhs) regional one, posing risks to Chevron’s Leviathan operations and regional LNG exports, including those from Qatar. Source: Haver. Source: Capital Economics. for by non-oil sectors, which are anticipated to con- by looser fiscal policy, robust private consumption, tinue expanding by 3.9 percent in 2023 and 3.4 per- and public investment drive. This reflects the remark- cent in the medium term. The main contributors to the able ongoing efforts and achievements in diversify- non-oil growth during the forecast period are private ing away from the oil and hydrocarbon sectors, in line consumption, fixed investments, and government with Vision 2030. Meanwhile, in the UAE, oil GDP is expenditures through looser fiscal policy (Figure 20). projected to grow at 0.7 percent while non-oil sectors The strong non-oil growth, despite a global slowdown, are anticipated to grow by 4.5 percent, supported by reflects the authorities’ continued efforts and achieve- strong performance in tourism, real estate, construc- ments in diversifying away from the oil and hydrocar- tion, transportation, and manufacturing and a surge in bon sectors across the region. capital expenditure. Overall GDP growth is expected Clear divergence in individual country pros- to slow down to 3.4 percent due to weaker global pects exist. Following a strong performance in 2022, activity, stagnant oil output, and tighter financial con- all GCC countries are expected to face an economic ditions. Although oil production in Kuwait is supported slowdown in 2023 (Figure 21). Saudi Arabia’s econ- by the newly established Al Zour refinery, it is still pro- omy is expected to report a contraction by 0.5 per- jected to contract by 3.8 percent in 2023 following cent in 2023 fueled by its voluntary oil supply cuts of tighter OPEC+ production quotas and reduced global 1 mb/d in June 2023, now extended to the end of the demand. The non-oil sectors are anticipated to grow year. As a result, oil GDP is expected to contract by by 5.2 percent driven primarily by private consump- 8.4 percent while non-oil sectors are expected to cush- tion supporting the overall GDP growth of 0.8 percent. ion the contraction, growing at 4.3 percent, supported Qatar is expected to grow by 2.8 percent in 2023 with Outlook and Risks 11 Despite decoupling between the oil FIGURE 19 •  …driven primarily by private FIGURE 20 •  and non-oil economies, overall gdp consumption, investments, and is projected to expand in 2023… looser fiscal policy 12 11 9 Contribution to growth, percent 8 7 5 4 Percent 3 0 1 –1 –4 –3 –5 –8 2019 2020 2021 2022 2023 2024 2025 2019 2020 2021 2022 2023 2024 2025 Private Consumption Govt. Consumption Oil GDP Non-oil GDP RGDP Fixed Investment Net Exports Source: WB Staff calculations. Source: WB Staff calculations. FIGURE 21 • Following a strong performance in 2022, individual GCC economies are projected to slowdown in 2023… 15 10 Groth, percent 5 0 –5 –10 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 Saudi Arabia United Arab Emirates Kuwait Qatar Oman Bahrain 2025 RGDP Oil GDP non-Oil GDP Source: WB Staff calculations. the hydrocarbon sector expanding by 1.3 percent. tourism, service sectors, and the continuation of infra- Robust growth is anticipated during this year in the structure projects in Bahrain. non-hydrocarbon sectors, reaching 3.6 percent, pro- pelled by thriving tourist arrivals and large events. Inflation is expected to be contained in 2023 and Oman and Bahrain will experience moderate growth remain subdued compared to other regions ... in 2023, with anticipated growth rates of 1.4 and 2.8 percent, respectively, aided by the development of Inflation in the GCC region will be contained in new natural gas fields and accelerated implementa- 2023 supported by exchange rate pegs, tight mon- tion of structural reforms in Oman and recovery in the etary policy, and generous subsidies. Inflationary 12 GULF ECONOMIC UPDATE: STRUCTURAL REFORMS AND SHIFTING SOCIAL NORMS TO INCREASE WOMEN'S LABOR FORCE PARTICIPATION FIGURE 22 • GCC inflation remains contained and …despite robust private sector FIGURE 23 •  relatively low… credit in 2023 20 9 16 6 Percent change 12 Percent change 8 3 4 0 2020 2021 2022 2023 2024 0 World Emerg.markets Kuwait Saudi Oman United Bahrain Qatar Arabia Arab Adv. economies Middle east & Central Asia Emirates GCC Domestic credit Inflation Source: IMF WEO October 2023; WB Macro-Poverty Outlook, AM 2023; and WB staff calculations. Source: WB Macro-Poverty Outlook, AM 2023; and Economist Intelligence Unit, 2023. pressure is estimated to be relatively low compared to fiscal spending and the reduction in oil receipts will the rest of the world (Figure 22), and consequently is narrow the surplus for 2023. The combined fiscal sur- unlikely to exert a substantial influence on either eco- plus for the GCC region is expected to narrow to 0.8 nomic growth and financial stability. Projections indi- percent of GDP in 2023 before slightly widening to 1.1 cate that the regional inflation rate is poised to reach and 1.2 percent of GDP in 2024 and 2025, respec- 2.8 percent in 2023 followed by a further decline to tively, supported by the recovery in oil prices and pro- 2.2 percent in 2024, supported by a relatively strong duction levels (Figure 24). The looser policy will allow U.S. dollar, cheaper global commodity prices, and tight governments, especially those with ample fiscal space monetary policy as GCC central banks continue to fol- like Saudi Arabia, UAE, Qatar, and Kuwait, to support low U.S. Federal Reserve policy. Despite signals of the non-oil sectors and compensate for the lost activ- higher policy rates,6 domestic credit in all GCC coun- ity in the oil sector. Furthermore, countries’ efforts in tries is expected to continue growing but at a slower the implementation of fiscal reforms will continue to pace (Figure 23). In Saudi Arabia, the implementation support long term fiscal sustainability and macroeco- of a restrictive monetary policy along with a ceiling on nomic stability. For example, Oman’s government’s domestic fuel prices is expected to mitigate the risk of commitment to fiscal and structural reforms through inflationary pressures. Meanwhile, in the UAE, Qatar, the Medium-Term Fiscal Balance Plan (MTFP) has and Kuwait, the combination of ample government significantly improved its fiscal balance. In Bahrain, subsidies and declining import costs is poised to keep the government has renewed fiscal reform efforts consumer prices under control. under the revised FBP and introduced a new four- year program (2023–26) focusing on enhancing liv- The GCC region is projected to register narrower ing standards, infrastructure, government services, surpluses in 2023 6 The Fed’s policymakers signaled that they expect to raise The regional fiscal balance is projected to reg- rates once more this year and envision their key rate ister a narrow surplus in 2023 and moderate in staying higher in 2024 than most analysts had expected. the medium term (Figure 24). The continued loose (AP News Sep 20, 2023). Outlook and Risks 13 FIGURE 24 • The GCC region projected to …with divergence in individual FIGURE 25 •  register a narrow surplus in 2023 countries. and moderate in the medium term… 15 50 18 10 40 14 5 30 10 0 Percent of GDP Growth, Percent –5 Percent of GDP 20 6 10 2 –10 –15 0 –2 –20 –10 –6 –25 –20 –10 –30 –30 –14 2019 2020 2021 2022 2023 2024 2025 –35 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 9:;.<=1><=