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BENGALURU: Economic growth in the Gulf Cooperation Council will accelerate this year at a pace not seen in a decade, according to a Reuters poll of economists, who said high inflation and a slowing global economy are the main downside risks.

Crude prices, the main driver of Gulf economies, rose after the Russian invasion of Ukraine in February and remained high, giving a major boost to the region’s oil and gas-rich economies.

An April 12-22 Reuters poll forecast overall growth across the six Gulf Cooperation Council economies would average 5.9 percent this year, the fastest since 2012.

“GCC economies have had a relatively strong start to 2022. The hydrocarbons sectors have benefited from increased oil production so far this year, with crude oil production up 12% for the UAE and 19% for Saudi Arabia over the same period.” She said. Haq, chief economist at Emirates NBD.

“The survey data for the first quarter of the year also indicates a strong expansion in the non-oil sectors, with strong growth in business activity and new work in the UAE, Saudi Arabia and Qatar.”

For Saudi Arabia, the region’s largest economy and the world’s largest crude oil exporter, about 80% — or 17 of 22 contributors — raised their forecasts from the previous survey in January.

It is expected to grow 6.3 percent in 2022 from the 5.7 percent projected three months ago, before slowing to 3.2 percent next year.

If that happens, growth in 2022 will be the fastest since 2011, when the oil price averaged around $111 a barrel.

Projected growth in Kuwait of 6.4% and the UAE of 5.6% will be the fastest in nearly a decade.

Qatar, Oman and Bahrain are expected to grow around 4%, the fastest in several years.

However, when asked about the two main downside risks to the GCC economies this year, 10 of the twelve economists who answered an additional question said inflation is high and the global economy is slowing.

Inflation has risen in most of the economies of the Gulf Cooperation Council (GCC) countries in recent months amid rising food prices due to the Russian-Ukrainian war.

Although modest compared to many other countries, inflation in the GCC is expected to exceed 2% this year, with the average expected high for Qatar at 3.5% and the lowest for Saudi Arabia at 2.5%.

“In the face of rising global commodity and food prices, we have revised our 2022 inflation forecast for the GCC region to around 3.5% from around 2.5%,” Citi’s regional head of economics, Ilker Domak, noted.

“Given that GCC countries import 85% of their food, the persistent upward pressure on global food prices could pose a challenge to policymakers in the region.”

Moreover, the uncertainty caused by the conflict in Ukraine could have a negative impact on a global economy that has just emerged from the ravages of the pandemic.

The International Monetary Fund last week lowered its global growth forecast for 2022, citing the impact of the war and describing inflation as a “clear and present risk”.

GCC countries, which depend heavily on energy export earnings, will face weaker demand in the event of an economic downturn – particularly in China, one of the world’s largest importers of oil and gas.

From a regional perspective, concerns about global growth become worrisome if it affects oil prices. Price pressures are certainly being felt, but assuming low inflation in 2023, current trends should not derail efforts to keep the non-oil sector recovery on track, said Maya Senussi, chief economist at Oxford Economics.

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