MUSCAT: The Sultanate’s economy is forecast to recover in 2021, albeit at a moderate 2.5 per cent growth rate as a sizable infrastructure investment programme gains momentum. Medium-term growth is projected to average 5.3 per cent over the forecast period, the World Bank has noted in its latest report.
According to the latest issue of the World Bank Gulf Economic Update (GEU), titled ‘Covid-19 Pandemic and the Road to Diversification’, Gulf Cooperation Council (GCC) economies are expected to return to an aggregate growth of 2.2 per cent in 2021 following a year of economic distress. This growth is buoyed by the global economic recovery, projected at 5.6 per cent and the revival of global oil demand and international oil prices.
The Covid-19 pandemic and the decline in global oil demand and prices dealt the GCC countries a health crisis and a commodity market shock causing a GDP contraction 4.8 per cent in 2020.
Fiscal deficits are projected to persist for most over the forecast period, however, but at narrower ratios to GDP in 2023 than during the economic downturn in 2020.
According to the GEU, the oil supply cutbacks and the four-year-low average oil price of $41.30 per barrel slashed the bloc’s goods and services exports by 8.1 per cent in real terms and turned the current account surplus of 6.8 per cent of GDP in 2019 into a deficit of 2.9 per cent of GDP in 2020.
Non-oil GDP is proportionately larger now in all the GCC countries than it was 10 or 20 years ago, but much work remains to be done. Many are still highly reliant on oil and gas exports, which remain over 70 per cent of total goods exports in Kuwait, Qatar, Saudi Arabia and Oman, and on oil revenues, which exceed 70 per cent of total government revenues in Kuwait, Qatar, Oman and Bahrain, the report stated.
“While the GCC has done a lot in the last year to contain the effects of the pandemic on their economy, including procuring vaccinations early on, they must continue to reform their public sector finances,” said Issam Abousleiman, World Bank Regional Director of the GCC Countries.
“The region needs to strengthen their competition policies to harness the benefits of telecommunications and the digitalisation of economic activity.”
The sixth issue of the GEU focuses on fiscal revenues and structural reforms including strategic investments in digitalisation and telecommunications, which can help enable more economic diversification.
Promoting private sector development remains at the core of national and regional economic diversification efforts. The GCC managed to complete only two state-owned enterprise privatisation transactions and only two public-private partnership (PPP) agreements in 2020, but it was a difficult year for commerce and investment anywhere.
Also, advancing the telecommunications frontier is a strategic investment sector for diversification and post Covid-19 recovery, that will serve the GCC well.
Past investments in the sector accorded the GCC sizable benefits during the pandemic as quarantines, lockdowns, and restrictions forced public health surveillance, wholesale and retail commerce, public and private education, banking and financial services, and private and government office work onto digital channels.
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