The hit to the Gulf Co-operation Council (GCC) economies from the pandemic may have been less severe than in other regions, but the recovery will probably take another two years, longer than elsewhere, according to Oxford Economics.
Moreover, the direct impact of a Joe Biden US presidency will probably be small for the GCC, but a more conciliatory approach to trade and foreign policy could reduce tail risks and lift sentiment and investment, Oxford Economics said in its latest research brief.
"The expected economic scarring from the dual shock of Covid-19 and low oil prices reflects high dependence on oil, limited scope for fiscal support, challenges of expat-dominated workforces, the key role of travel and tourism in the economy, and geopolitical risks," the brief said.
The oil sector will make a positive contribution to growth, but not until the second half (H2) of 2021, it said, adding in the near term, the drag from oil production cutbacks and fiscal strain from low oil prices will continue.
Headwinds from the oil sector will “gradually dissipate” through 2021, but oil output cutbacks stemming from the Organisation of the Petroleum Exporting Countries + production quotas will continue to weigh on activity in the first half.
"Consequently, the oil sector’s contribution to GCC growth will be broadly flat, with non-oil performance leading the overall rebound," the brief said, forecasting the GCC GDP growth at 2.3% in 2021, after an expected contraction of 5.3% in 2020.
Kuwait, Oman and Qatar are expected to see above average economic performance with their expected GDP growth at 3.6%, 3.2% and 2.8% respectively in 2021, the brief said.
Its forecast for Brent crude is $49.3 a barrel in 2021, slightly higher than the $41.7 for this year, but "significantly" lower than the $65-$70 range in 2018-19. "And we believe the upside for oil prices is limited through 2022 and 2023," it added.
On the inflation front, Oxford Economics suggests that Kuwait, Oman and Qatar are expected to register lower levels of 2.1%, 1.7% and 0.8% respectively in 2021 compared with the GCC average of 2.3% and the world average of 3%.
The outlook for tourism has improved with vaccine approvals, though it may be well into H2 2021 before all restrictions are lifted and confidence returns, it said, noting that travel and tourism account for 8%-16% of gross domestic product or GDP across the GCC.
"The expected economic scarring from the dual shock of Covid-19 and low oil prices reflects high dependence on oil, limited scope for fiscal support, challenges of expat-dominated workforces, the key role of travel and tourism in the economy, and geopolitical risks," the brief said.
The oil sector will make a positive contribution to growth, but not until the second half (H2) of 2021, it said, adding in the near term, the drag from oil production cutbacks and fiscal strain from low oil prices will continue.
Headwinds from the oil sector will “gradually dissipate” through 2021, but oil output cutbacks stemming from the Organisation of the Petroleum Exporting Countries + production quotas will continue to weigh on activity in the first half.
"Consequently, the oil sector’s contribution to GCC growth will be broadly flat, with non-oil performance leading the overall rebound," the brief said, forecasting the GCC GDP growth at 2.3% in 2021, after an expected contraction of 5.3% in 2020.
Kuwait, Oman and Qatar are expected to see above average economic performance with their expected GDP growth at 3.6%, 3.2% and 2.8% respectively in 2021, the brief said.
Its forecast for Brent crude is $49.3 a barrel in 2021, slightly higher than the $41.7 for this year, but "significantly" lower than the $65-$70 range in 2018-19. "And we believe the upside for oil prices is limited through 2022 and 2023," it added.
On the inflation front, Oxford Economics suggests that Kuwait, Oman and Qatar are expected to register lower levels of 2.1%, 1.7% and 0.8% respectively in 2021 compared with the GCC average of 2.3% and the world average of 3%.
The outlook for tourism has improved with vaccine approvals, though it may be well into H2 2021 before all restrictions are lifted and confidence returns, it said, noting that travel and tourism account for 8%-16% of gross domestic product or GDP across the GCC.