GCC economies to double growth to 4% in 2025: ICAEW

The GCC or Gulf Co-operation Council economies will more than double their growth from 1.9% in 2024 to 4% in 2025, according to The Institute of Chartered Accountants in England and Wales (ICAEW).

This acceleration comes despite the extension of Opec+ oil production cuts and positions the GCC to significantly outperform global GDP growth, which is projected to increase modestly from 2.7% in 2024 to 2.8% in 2025, according to the latest ICAEW Economic Insight report prepared by Oxford Economics.

“The business landscape across the GCC continues to evolve and mature, creating new opportunities for growth and innovation," said Hanadi Khalife, Head of Middle East, ICAEW.

The report said the direct impact of US President-elect Donald Trump’s policies on the GCC growth is likely to be limited in the near term, but it is slightly more cautious on its GCC growth projections.

"We see a broadly steady performance of the non-energy sectors, with expansion of 4% this year and next. We expect Trump’s policies will take time to feed through, with the impact on growth performance occurring mostly in 2026-27," it said.

Finding that oil prices have been volatile in recent months, buffeted by geopolitical tensions in the region on one hand and concerns over demand on the other; ICAEW said the Opec+ alliance has delayed a planned supply increase until January (from December previously) in the face of weak demand, reinforcing the group's commitment to supporting oil prices.

Highlighting that Trump’s stated support for the domestic energy sector may limit the pace of unwinding of the Opec+ supply cuts, although he will likely be tougher on Iran, potentially removing some of its crude exports off the market; the report said "we now expect Opec+ to keep output steady until the second quarter of 2025, and we forecast oil prices to average $72.6 per barrel in 2025 (down from $77.5 we forecast three months ago) and $71.5 in 2026."

The extension of oil output cuts by the Opec+ group prolongs the drag from the energy sectors on GCC growth, but it expects oil activities would rebound "strongly" in 2025, with growth of 4.2%.

Stressing that the GCC's projected 4% growth in 2025 highlights the success of the region’s diversification efforts amid global challenges; Scott Livermore, ICAEW economic adviser, and chief economist and managing director, Oxford Economics Middle East, said as the region continues to expand its tourism, real estate and financial sectors; managing capacity constraints in these high-growth sectors, as well as navigating global uncertainties, will be key to sustaining momentum and long-term economic stability.”

Regional PMIs (purchasing managers’ index) remain firmly in expansionary territory, supporting its positive outlook for the GCC non-energy sectors, which look on track for a 4% expansion this year and next, according to the report.

Fiscal revenue performance has been impaired by ongoing oil production cuts and lower oil prices but should stabilise in 2025, it said, adding meanwhile, government spending will likely rise only modestly next year.

"Overall, this will result in the aggregate GCC budget position remaining in a small surplus, thanks to ongoing surpluses in Qatar and the UAE," it said.

The ICAEW has raised the aggregate GCC inflation projection slightly to 1.8% this year (1.7% before) and 2.3% in 2025 (up 0.2pp on three months ago).

Recent readings show inflation is below 1% in Bahrain, Oman and Qatar, while it slowed to a four-year low of 2.4% in Kuwait.

The GCC central banks will follow the rate path of the US Federal Reserve given the exchange rate pegs against the US dollar, it said.

Following 75bps (basis points) in cumulative rate cuts in September and November, its baseline forecast assumes a 25bps rate cut in December, but it has scaled back expectations for Fed easing next year and now forecast a total of 75bps (down from 100bps).

"There is a risk that the (US) Fed could deliver even fewer rate cuts than what we assume in our updated baseline," it said.