GCC countries will benefit the most from international energy market developments in 2023, the Economist Intelligence Unit said and noted they will see high oil and gas revenue spillover and help to drive business activity in non-energy sectors — especially through state-backed investment in economic diversification projects.
Major oil and gas producers in the Middle East have benefited substantially from strong global demand, rising output and high prices for their energy exports in 2022, and the region’s net energy exporters — except Iran — can look forward to another year of “decent returns” from international markets in 2023.
The Opec+ alliance will solely prioritise price levels, despite concerted diplomatic efforts by the US and European allies to persuade the cartel to increase production.
The recent move by Opec+ to cut output by 2mn barrels per day will be borne by Saudi Arabia and, to a lesser degree, the UAE.
The actual cut to output will be about half the headline figure, as several major producers, most notably Nigeria and Russia, are producing well below their current quotas.
“We expect Opec+ to maintain its solidarity and forecast that oil prices will remain above $90/barrel until at least mid-2023,” EIU noted.
The region’s travel and tourism industry is showing “strong signs of recovery” and international visitor arrivals could return to pre-Covid levels by the end of 2023 — largely owing to effective promotional campaigns, major investments and the release of pent-up demand, EIU noted.
Domestic tourism has supported a “depressed” market in recent years and this will continue to be an important outlet for the tourism sector, along with regional arrivals.
International arrivals to the GCC were back on an upswing and accelerated quickly in late 2021 and in 2022, and looking ahead they will be aided by vaccine rollout and safety measures, lighter travel restrictions, a further promotional drive and the release of pent-up demand for travel and tourism.
In the longer term, travel, tourism and hospitality are identified as key ingredients of strategic growth plans and consequently are subject to pro-business and pro-investment reforms as well as receiving substantial investment from the public and private sectors.
Inflation will be contained across the GCC in 2023 by exchange-rate pegs to the dollar and fuel subsidy regimes, EIU said.
Elsewhere, elevated price pressures will weigh heavily on economic growth and stability in the region’s more troubled states and some major energy importers in the region.
“The balance of risks to the region’s outlook is heavily weighted to the downside, which reflects various global and regional shocks that could act to undermine economic growth and stability, social cohesion and security.
“Upside risks are limited to a low-probability scenario surrounding a quick resolution of the war in Europe leading to less volatility in commodity markets — food and fuel — and easing prices pressures, as well as the low risk of a stronger rebound of demand from China as Covid-19 disruption dissipates and the authorities guide the economy to much faster growth,” EIU said.