Elevated oil prices, higher oil production and robust momentum in non-oil activity, buoyed by rapid vaccination inoculations, will see GCC GDP growth sprint at 6.1% in 2022 – fastest pace of cyclical expansion since 2011 (and higher than EM peers), a report said.

The “this time is different” mantra is bearing fruit given the authorities vigour to structurally transform economies with hurdles to investment/productivity– institutions, human capital, innovation, market efficiencies and infrastructure – being reversed, said the Mitsubishi UFJ Financial Group (MUFG), a Japanese bank holding and financial services company, in its “GCC 2022 regional outlook”.

Commitment to embracing the transformation is rising

Net zero pledges are central to regional efforts in addressing the “E” in ESG – current pulse is anchored on targeting an orderly transition through energy market stability (i.e. safeguarding oil/gas supply) until CCUS, green hydrogen and other low carbon technologies become less expensive and more mature into mainstream energy systems.

Breadth and pace of “S” and “G” changes to the ease of doing business, labour, housing and financial markets, legal landscape, company disclosures and the social code is striking, the report said.

Geopolitical considerations

Geopolitical impetus continues to shift away from its longstanding focus on confrontation, centred on diminished US regional influence – consequences is more cooperation and diplomatic engagement among GCC countries.

Regional economic competition has intensified which on net will raise non-oil activity, increase FDI inflows and enhance investors’ optionality though the full extent of the new modus operandi will be conditional on many factors.

Financial wealth

Higher government revenues and expenditure rationalisations in 2022 budgets strengthens balance sheets and offers greater fiscal capacity to navigate towards a post-pandemic equilibrium– also supportive of debt markets – not only improving credit profiles and stabilising sovereign ratings, but reducing new issuances and restricting supply, thus easing debt burdens

The report highlights three key risks: (1) an unexpected decline in oil prices, (2) fiscal slippage, and (3) rising off-budget spending/borrowing (PIF, NDF, EDO, amongst others). – TradeArabia News Service