Khaleej Times, Tue, Nov 21, 2023 | Jumada Al-Uola 6, 1445
Middle East economic growth expected around 3% next year: EIU
Economic growth in the Middle East is expected to
reach around three per cent next year, a report showed on Thursday.
According to the Economist Intelligence Unit’s
(EIU) Middle East Outlook 2024, the Gulf Co‑operation Council (GCC) states are
expected to shrug off a slowing global economy in 2024, aided by a host of
factors. A “loosening of Opec+ oil production quotas, relatively strong growth
in key Asian markets, and trade and investment diversification strategies” are
likely to drive the region’s growth, the EIU said in its report.
Geopolitical risks are intensifying in the region,
with the Israel‑Hamas conflict showing no signs of easing, the EIU noted. “The
Israel‑Hamas conflict will continue to reverberate throughout 2024 and fuel
simmering resentment in the wider Arab world towards Israel and its Western
allies; the outlook is bleak for Arab‑Israeli relations, and Iran’s proxies will
be more disruptive after a period of relative calm,” the report said.
Iran faces a difficult foreign policy balancing act
and a dire economic outlook in 2024; it will engage with the West to ease the
weight of sanctions, while at the same time building relations with Gulf Arab
states and further strengthening ties with China and Russia, the report said.
The Middle East will remain a focal point for new
Eurasian transport corridors that offer alternative trade routes and
geostrategic alliances for regional heavyweights and major international powers.
“We forecast that Middle Eastern economic growth will rise by just under 3 per
cent in 2024 following measly estimated growth of 1.8 per cent in 2023. The
region’s largest economy, Saudi Arabia, will phase out unilateral oil production
cuts that were imposed in mid‑2023, and investment will continue to flow into
non‑energy sectors linked to the kingdom’s diversification drive,” the EIU said.
Travel and tourism, hospitality and entertainment,
light and heavy manufacturing, metals and mining, information and communications
technology (ICT) and digital transformation, transport and logistics, alongside
the green economy, are all earmarked for substantial further investment in 2024
as Saudi Arabia rides a capital expenditure wave towards fulfilment of its
Vision 2030 economic diversification strategy. “The UAE, Qatar and Oman, other
major GCC states, will benefit from their own trade and investment
diversification strategies,” the report noted.
The EIU expects China to continue to press the
GCC states to price the oil that it buys from the Gulf in renminbi rather
than US dollars. “The incorporation of Saudi Arabia into the Brics group of
emerging economies in 2024 will add an extra layer of diplomatic pressure
for the currency switch, but Saudi Arabia will continue to resist for
geopolitical and economic reasons. We do not expect any near-term weakening
in Saudi Arabia’s fundamental commitment to the US dollar peg,” the report
said. More broadly, the GCC currency pegs to the US dollar will remain
unchallenged in 2024. “The GCC is backed by considerable financial assets,
especially those owned by Saudi Arabia and the UAE, and has historically
demonstrated a capacity and willingness to weather even protracted bouts of
volatility in global oil prices and regional insecurity,” the report said.
Emergence of competing transport corridors
The Middle East has become a focal point for new Eurasian transport
corridors that offer alternative trade routes and geostrategic alliances for
regional heavyweights and major international powers. The UAE, Saudi Arabia,
Jordan and Israel, along with the US, the EU and India, signed a Memorandum
of Understanding (MoU) in September to develop the India‑Middle East‑Europe
Economic Corridor (IMEC). However, the Israel-Hamas conflict may dent the
prospects of the corridor’s developent in the short-term, the EIU said.
Iran and Russia are liekly to push ahead with plans to develop the
International North‑South Transport Corridor (INSTC) project, which runs
from Russia through Iran and onwards from the Iranian port at Bandar Abbas
to South Asia. The INSTC is part of Russia’s “Pivot to the East” strategy
and offers Iran the possibility of becoming a more significant transit hub
in the region.Iraq hopes that Turkey and China will continue to back the
multimodal Iraq Development Road (IDR) and the connecting Grand Faw Port
project, involving Iraqi road, rail and port developments connecting Turkey
to the northern tip of the Persian Gulf. Ultimately, the IDR would intersect
with the Middle Corridor, another Eurasian transport route advocated by
Turkey, which is a key part of China’s Belt and Road Initiative.