What would be the Gulf’s economic prospects for 2022? This is a question asked by everyone, whether it is an individual, a business leader or local and international investors. The GCC has become a full-fledged player in the global economy and a destination for foreign investment, as evidenced by the trillions of dollars channeled since the discovery of oil 90 years ago.
Clearly, the GCC countries were able to weather their biggest economic crisis ever caused by the pandemic, paving the way for focused efforts and prudent allocation of resources to accelerate growth. This has been helped by the steady rise in oil prices and the confirmation of mega projects of economic diversification. These include the production of renewable energy sources, as well as the adoption of greater economic transparency in the wake of the COVID-19 crisis.
These factors provide a solid foundation for a solid start to the New Year. Regarding oil price forecasts, the International Energy Agency predicts that demand in 2022 will reach 2019 levels of 99.5 million barrels per day, with a marked decline in some key production reservoirs, such as United States, which is expected to reach production of 11.2 million barrels. against 13 million barrels in 2019.
This is forcing OPEC + countries, especially GCC countries, to increase production, which is expected to lead to levels of $ 85 per barrel on average for 2022, according to the Bank of America. This seems a practical forecast, especially since this month’s experience has proven that the pumping of strategic reserves from consuming countries, notably by the United States – which has pumped 18 million barrels – has failed. worked. The use of strategic reserves caused a temporary drop, then prices rose to around $ 80 earlier in the week.
In surplus territory?
Apart from the financial reforms and the volume of non-oil investments announced by the GCC countries, the growth of the oil and non-oil sectors will exceed recent forecasts. Saudi Arabia‘s finance ministry has announced that it expects the Kingdom’s economy to grow 7.6% in 2022, up from 2.6% in 2021. The rest of the GCC countries are expected to follow similar trajectories, which will lead to attracting more domestic and foreign investment. and create more jobs.
Growth is expected to involve all non-oil sectors, and the growth created will in turn be reflected well in financial markets and in equities of listed companies. The annual budgets of the GCC, an indicator of financial strength due to the large impact that government spending will have due to rising oil prices, looks promising. Most budgets will run in good surpluses, with Saudi Arabia announcing its 2022 budget with a surplus of $ 24 billion for the first time since 2013.
Kuwait expects a surplus of $ 3.3 billion in the 2021-2022 budget, while the UAE has released a balanced budget for the next five years with the possibility of a surplus. Qatar is also expected to show a surplus in its 2022 budget, and the same could be true of Bahrain and Oman. If oil prices exceed the level projected in budgets have been set, the size of the surpluses may well exceed those of the past.
With optimistic projections from the World Health Organization that COVID-19 could be eliminated in the coming year, the economic outlook for the GCC indicates that they will achieve what can only be a remarkable recovery. .
– The writer is an energy and economic affairs specialist in the Gulf.