However, policies pursued by Saudi Arabia and the UAE could counter this by boosting non-oil revenues.
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Lower oil prices pose a challenge for a number of GCC countries that rely heavily on hydrocarbon receipts to balance their budgets, notably Bahrain and Oman, as noted by the ICAEW in its report, “Economic Update: Middle East,” a quarterly economic forecast for the region prepared directly for professionals in finance.
According to Michael Armstrong, Regional Director for the Middle East, Africa and South Asia, FCA and ICAEW,
“The outlook for Middle Eastern economies remains challenging for the rest of 2019 as global developments continue to be of crucial importance to the region. Continued uncertainty in the global oil market means increasing non-oil revenues is vital for regional economies. Governments in the region have been proactive, but they must continue to support their economies with pro-growth initiatives.”
The report also states that the burden of generating economic growth and employment is expected to fall more on the non-oil sector in 2019.
This means that Saudi Arabia and the UAE, the two largest GCC economies, are expected to drive in non-oil-sector growth through various pro-growth government initiatives, expansionary budgets and fiscal stimulus plans.
The non-oil sector in the GCC is expected to accelerate from an estimated 2.3 percent last year to 2.6 percent in 2019. Indeed, as the report notes, several proxy indicators of economic activity paint a positive picture.
Credit to the private sector has been trending upwards in most GCC countries, and the quarterly average of the PMI index, a gauge of the health of the private sector, continued to show some improvements in Q1 2019 in both Saudi Arabia and the UAE compared to Q4 2018.
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