Solid non-oil GDP growth likely to continue in Q4 2024 in MENA: DNB

In the first half of the year, non-oil gross domestic product (GDP) growth was solid, with Saudi Arabia, the United Arab Emirates, Kuwait and Oman all posting strong numbers. This trend is expected to continue in the fourth quarter (Q4) this year, with looser monetary conditions likely to further boost non-oil sectors.

The US Federal Reserve’s rate cuts have eased financial conditions in the region, allowing GCC central banks to lower or start lowering their rates, making credit more accessible and supporting non-oil growth, particularly in sectors such as tourism, manufacturing and retail, the DNB document noted.

However, oil revenues will remain a drag on overall economic growth due to ongoing production cuts by OPEC+ members. These cuts, which are set to extend to 2025, aim to stabilise oil markets but have reduced revenues for major oil exporters.

The Organisation of the Petroleum Exporting Countries (OPEC) signed an agreement with 10 other oil-producing countries to create what is known as OPEC+. The non-OPEC participants in OPEC+ are Russia, Mexico, Kazakhsthan, Oman, Azerbajan, Malaysia, Bahrain, South Sudan, Sudan and Brunei.

While non-oil sectors continue to perform well, the oil sector’s contraction will weigh on fiscal balances and could limit the region’s ability to expand public investment, DNB noted. In addition, global demand forecasts for oil have been revised down, partly due to weaker-than-expected growth in China, further dimming the prospects for a rebound in oil revenues.

Political risks also present a significant downside for the region’s economic outlook. Tensions in the Red Sea, particularly Houthi attacks on maritime shipping, continue to pose a threat to trade flows and could disrupt supply chains.

Israel’s heavy strikes against Hezbollah, the country’s ground invasion of Lebanon and retaliatory actions against Israel by Iran have raised concerns about the conflict spreading even further in the region.

While the non-oil economy is set to benefit from easing financial conditions, the combination of weak oil revenues and geopolitical risks will limit overall growth in the MENA region for Q4 2024.

Fibre2Fashion News Desk (DS)