GCC economy set for strong rebound as oil production recovers in 2025

The GCC region is expected to undergo a substantial economic recovery in 2025, with growth forecast to increase to 4.4%, up from a projected 2.1% in 2024. This surge is primarily attributed to the gradual phase-out of oil production cuts by OPEC+, as highlighted in the latest report by ICAEW and Oxford Economics.

The report offers a cautiously optimistic outlook, noting that robust domestic activity and expected interest rate cuts will further support consumption and private investment. Although the 2024 growth forecast has been slightly revised downward due to extended oil production cuts, the 2025 outlook remains positive, with oil production anticipated to boost the region's economies significantly.

The resilience of non-energy sectors is also emphasized, with growth in these areas projected at 4.2% in 2024 and 4.4% in 2025. Key sectors such as tourism, trade, and finance are driving the region’s diversification efforts, supported by strong domestic activity as reflected in recent PMI data.

Kuwait’s economy, impacted by ongoing oil production cuts, is expected to grow by just 0.5% in 2024 but should recover to 2.5% in 2025-26, bolstered by the discovery of the Al-Nokhatha oil field with estimated reserves of 3.2 billion barrels. Oman, supported by a resilient non-energy sector, is projected to achieve 1.5% growth in 2024, accelerating to 2.3% in 2025 as oil production restrictions ease.

Despite ongoing geopolitical risks, including regional conflicts that may affect sectors such as tourism and trade, there is a potential for an upside from a breakthrough in nuclear talks with Iran, which could boost oil production and exports.

The GCC inflation rate is forecast to be 1.7% in 2024, rising to 2.1% in 2025. While inflation remains below 2% in most GCC countries, Kuwait and the UAE are experiencing slightly higher rates due to housing price pressures.

ICAEW’s Hanadi Khalife emphasized the importance of resilience in navigating global economic and regional geopolitical challenges, while Scott Livermore from Oxford Economics noted the strong performance of both energy and non-energy sectors in positioning the GCC for sustained success in the coming years.

Overall, the report presents a positive outlook for the GCC’s economic future in 2025, fueled by the anticipated increase in oil production and the continued strength of non-energy sectors.