Thursday, April 25, 2024
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HomeBusinessThe regional economy remains robust, despite oil cuts and geopolitical turbulence

The regional economy remains robust, despite oil cuts and geopolitical turbulence

DUBAI, UAE – Beyond the mounting social and humanitarian cost of the ongoing geopolitical crisis in the region, global trade has also been impacted. The current situation has resulted in severe disruptions in the Red Sea and added to the interest in alternative land routes, including across the Arabian Peninsula and Levant or through Iraq and Turkey. These routes have economic and geographic logic but face their own geopolitical challenges, as we will examine in this report.

We are now seeing a stronger focus around sustainability and greening of the economy. 2023 saw a surge in green financing, especially in countries such as the UAE and Saudi Arabia. Some of this can be attributed to raised awareness in the run up to COP28 but overall, green finance remains an untapped opportunity for the region, in particular the Gulf Cooperation Council (GCC) countries, that have well-developed capital markets. In this report, we look at how green finance is accelerating economic diversification and job creation in the region, and its potential to attract foreign direct investment.

In this edition, we also examine the uncertainty around oil demand growth, with the OPEC+ deciding to keep production flat in the second quarter, maintaining the 2.2m barrels per day (b/d) in additional cuts, mainly by Middle Eastern producers. This uncertainty has also led to Saudi Arabia’s decision to suspend its planned capacity expansion, as its buffers are adequate for the next few years. Conversely, gas demand growth looks promising in the medium term, prompting Qatar to upsize its giant North Field expansion project and Abu Dhabi is also considering new LNG capacity.

Finally, we look at non-oil trends in the region, with Gross Domestic Product (GDP) and Purchasing Manager Index (PMI) indicators showing significant growth in Saudi Arabia and the UAE, despite the decrease in oil production. Inflation has also cooled significantly in the region, although there is pressure on rents in Saudi Arabia and the UAE.

Source: PWC Middle East

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