MENA Economic Growth Set to Accelerate as Oil Production Increases
This optimistic outlook aligns with the International Monetary Fund's (IMF) forecast of a 4% growth rebound in the MENA region for 2025, contingent upon the cessation of oil production cuts and the resolution of ongoing conflicts. The IMF had previously adjusted its 2024 growth projection to 2.1%, citing geopolitical tensions and extended OPEC+ oil production cuts as primary factors influencing the downward revision.
In Saudi Arabia, the economic growth rate is expected to accelerate to 4.4% in 2025, following two years of modest performance. This improvement is attributed to the anticipated increase in oil production after OPEC+ raises output, which is projected to enhance revenues across the six Gulf Cooperation Council (GCC) countries. Oil prices are forecasted to average $76.75 per barrel in the coming year.
The United Arab Emirates (UAE) is forecasted to be the fastest-growing economy within the GCC, with an expected growth rate of 4.9% in 2025. The UAE's advanced diversification efforts position it to significantly benefit from higher oil output. Qatar is projected to experience a growth rate of 2.7%, with other GCC countries exhibiting varied growth trajectories. Inflation across the region is anticipated to remain low, ranging from 0.8% to 3.0%.
However, the economic outlook is not without challenges. The IMF emphasizes that the projected growth rebound is contingent upon the cessation of oil production cuts and the alleviation of prevailing conflicts. The organization urges the implementation of structural reforms to enhance medium-term growth prospects. Additionally, the IMF has allocated $13.4 billion in new funding for countries including Egypt, Jordan, and Pakistan since January 2024, highlighting the region's ongoing financial needs.
In the broader context, the global oil market is experiencing shifts that could impact the MENA region's economic trajectory. Notably, China's oil imports have declined, suggesting the country may have reached peak oil consumption. Factors contributing to this decline include China's property crisis, a switch from diesel to liquefied natural gas (LNG) for trucks, and the rising number of electric vehicles. This shift has significant implications for global oil demand, potentially leading to slower growth and lower oil prices.
Key members of the OPEC+ alliance have postponed planned increases in oil production due to lower-than-expected demand and rising output from non-member countries. Initially, OPEC+ intended to gradually restore 2.2 million barrels per day starting from January 2025, but this has now been deferred to April 2025, with adjustments extending over 18 months. This delay aims to prevent further depression of oil prices, which have already declined due to reduced demand from China and an oversupplied global market.
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