Powering Growth: UAE, Saudi Arabia Lead Regional Expansion Despite Oil Cuts & Conflicts
Economic Resilience Amid Challenges | UAE, Saudi Arabia
Buoyed by a stronger-than-expected non-oil GDP growth in the UAE and Saudi Arabia, the Middle East economy remains robust, despite oil cuts and geopolitical turbulence, according to economists.
UAE’s Milestone Achievement
The UAE has achieved “a historic first” as its robust national economy reached a milestone in its diversification drive with the non-oil sector accounting for 73 per cent of the country’s total GDP.
Saudi Arabia’s Economic Transformation
As the world’s biggest oil exporter transforms its economy under its Vision 2030 diversification agenda, its economy is projected to grow by 2.7 per cent this year and 5.5 per cent in 2025 after contracting by about 1.1 per cent last year due to cuts in oil output.
Role of Non-Oil Sector
Richard Boxshall, partner and chief economist, PwC Middle East, said oil demand plays a key role in influencing the growth of oil-exporting Middle East countries. “Nonetheless, strong growth in the non-oil sector is expected to counterbalance these impacts.”
Focus on Sustainability and Green Finance
“The region is increasingly focusing on sustainability, aligning with net zero ambitions and the imperative for economic diversification. The growth in green finance is a strong indication of this focus and has the potential to enhance the region’s appeal to foreign investors,” said Stephen Anderson, partner, Middle East Strategy leader at PwC Middle East.
Momentum in Green Financing
The report noted that there is a growing momentum around green financing following the success of COP28 and the introduction of green finance frameworks in the region. In 2023, the issuance of green bonds and sukuk in the Middle East doubled to $24 billion, led by the UAE and Saudi Arabia.
Ongoing Challenges and Potential Solutions
Oil cuts are extended, but the non-oil sector remains robust: Opec+ members have agreed to extend production cuts into the second quarter of this year, recognising slower growth in demand for oil, alongside the risk of increasing supply from non-Opec+ countries.
Alternative Trade Corridors
The disruption to Red Sea trade has revived discussions around the need for alternative trade corridors. Two major trade routes proposed in recent years are the India-Middle East-Europe Economic Corridor (IMEC) and Iraq’s Development Road, both having their challenges and advantages. Progress on either initiative is unlikely until the current conflict is resolved.
