The global economy faces another period of uncertainty in 2023, with many countries expected to face recessions and continued inflation putting pressure on both government and household budgets. Some Middle Eastern countries are facing these headwinds full on, but the GCC seems increasingly like an island of calm in this storm as it looks set to buck the trends of the forecasted global recession likely to hit at least a third of the world's economies in 2023, according to the IMF.
In this issue, we review the latest data on inflation, growth and public finances. Inflation in the region peaked at under 5% and has eased to 4% in late 2022, far below the levels seen in many major economies, with forecasts that it will decline further in 2023.
The region saw some of the strongest growth globally in 2022; indeed Saudi Arabia was estimated by the IMF to be the strongest growing G20 economy by some margin, averaging at 7.6%, and having achieved 8.8% in the third quarter. The tapering of OPEC+ production cuts was a major part of this, but non-oil growth was also robust in the Kingdom and elsewhere in the GCC.
Public spending and liquidity supported by oil revenue are certainly factors behind the non-oil growth, along with the ongoing recovery from the pandemic, but is not the whole story.
In fact, there are indications from 2022 outturns and 2023 budgets that Gulf states are being much more fiscally disciplined during the current oil boom compared with the two previous ones this century. This is part of the reason why credit rating agencies are now raising their assessments of Gulf sovereigns after years of downgrades.
The coming months will include the next OPEC+ meeting in early February, although at present the indications are that quotas will remain unchanged for much of the first half of 2023.
The region as a whole is more integrated than it has been for years both socially and economically, as seen during the FIFA World Cup, and 2023 is likely to bring a raft of cross-border investments along with many more IPOs to boost capital markets, another area in which it could be a positive exception to the global trends.
