Cairo – Decyha: The non-oil sectors in the Gulf Cooperation Countries (GCC) countries, over the past few years, have begun to shift their economies to rely more on the non-oil sectors; and thus, even with turbulances and slowdowns in different industries in the region, most experts agree that the non-oil sectors in most of the Gulf is expected to see significant growth in 2017 and the coming years.
In 2016 the non-oil sector recorded a combined growth of 1.8% throught the region, a relatively slow level incomparison to the GCC expansion goals. However, projections are showing a slightly better growth rate in 2017,according to data compiled by the Gulf Petrochemicals and Chemicals Association.
Several banks and organizations have already set their predictions for the non-oil sectors’ contribution to the Gross Domestic Production (GDP) growth in 2017, the average of these ratings see a growth of 3%.
The non-oil sectors are additionally showing stronger development and growth than the oil sector. However, GCC countries are at different levels of resilience. For example, Bahrain and Oman are experiencing challenges due to their low growth. Unlike Qatar and United Arab Emirates (UAE) that are doing significantly better.
As the non-oil sectors have begun to gain grounds in terms of GDP composition, the economies of the Gulf are starting to experience some relief; the GCC countries are currently adapting to lower oil production and fiscal reforms, stated the International Monetary Fund (IMF) in a report, for which it highlighted that the region’s reforms are compelling.
This part of the GCC economies has been gathering pace, Jihad Azour, Director of the Middle East and Central Asia Department at IMF, noted in a re-affirming statement, adding that the sector is recovering and gaining momentum at a rate that is better than oil related sectors.
Qatar
In terms of Qatar’s economy, the country has successfully managed to move to adapt to a diversified economy in which non-oil sector, principally and effectively plays a role in, after it had relied on the oil-based economy for years, according to a report that was issued by Qatar National Bank (QNB).
It is deemed to lead the non-oil sectors’ growth in the GCC countries in 2017, followed by the UAE and Kuwait, the National Bank of Kuwait (NBK) noted earlier this year in its economic outlook. According to several ratings from different organizations, Qatar is showing the highest non-oil sectors GDP growth and has successfully broadened its economic base.
The non-oil sectors, in Qatar, have jumped from an average of 21% to 61% currently, according to the Qatari Minister of Economy and Commerce, Ahmed Bin Jassim Al Thani’s opening speech at the 4th International Conference on Entrepreneurship in Economic Development 2017. He further highlighted that small and medium enterprises (SMEs) have had a significant impact in achieving such growth levels.
In February 2017, non-oil exports in Qatar recorded an increase of 22.1%, from QAR 1.4 billion in January 2017, reaching QAR 1.71 billion.
United Arab Emirates
For the UAE, statistics have shown that the non-oil sectors currently represent about 69.5% of Abu Dhabi’s total GDP. UAE is also taking steady steps towards diversifying its economic base side by side with the oil sectors, according to Oxford Business gGroup.
The UAE’s GDP is projected to expand to stand at 3% in 2017 and 4% in 2018 through strengthening the non-oil sectors that will be the key driver to this shift, according to the IMF. The country’s expansion palns will mostly focus on growth on particularly industry and services including construction, logistics, and education.
The non-oil sectors have been outperforming the oil sectors in the Emirates over the past two years, specifically due to the high performance of real estate, construction, and tourism sectors that the UAE has been relying on, according to a PR statement by Arjuna Mahendran, Chief Investment Officer of Emirates NBD.
Kuwait
Moving on to Kuwait, the country’s non-oil sectors are expected to maintain their growth in 2017 and 2018. The resilience of the Kuwaiti economy is ongoing and the non-oil sectors are projected to perform well under the current conditions, according to NBK.
The investment program led by the Kuwaiti government is expected to support non-oil growth at 3-4% in 2017 and 2018, despite the dropdown in some of its non-oil sectors.
Saudi Arabia
The non-oil private sector in the Saudi kingdom has shown significant improvement in the first quarter of 2017. The Purchasing Managers’ Index (PMI) rose to 56.5 in April, indicating an expansion in the sectors. However, the IMF has highlighted the country’s need to accelerate its pace in order to further diversify its economy and maintain growth rate over the next few years.
Oman
The sultanate is currently seeking to build a non-oil based economy to diversify its revenues, especially as its overall GDP growth declined by 5.1% in 2016 due to the oil price slump.
Despite a current focus on the non-oil sector from the Omani state, particularly on achiving higher percentages of growth in tourism, logistics and mining sectors; growth of Oman’s in non-oil sectors stood only at 0.6% in 2016. The IMF has predicted that the non-oil growth in Oman in 2017 will grow by 0.5%.
Bahrain
Bahrain is deemed as the most vulnerable economy, with high fiscal risks, among the GCC countries, according to the World Bank. The country’s resilience to low oil prices is rather weak due to its limited reserves and high debt levels.
Nevertheless, the country’s non-oil sector received a boost in March after Saudi Arabia had poured millions of dollars in funding for housing and road projects.
Bahrain’s non-oil sector saw a 3.7% growth in 2016, according to the IMF. Its reform plans include a significant expansion in non-oil sectors, including financial services, tourism, logistics, among other fields.
Looking Back on GCC Sector Performance
The non-oil industry grew strongly in 2012 throughout the GCC countries, even before the dropdown in oil prices in 2014. Despite the drop in the real GDP in these countries, the non-oil sectors have maintained their contributions to the total GDP growth of GCC countries.
The combined growth rates of the non-oil sectors in the GCC countries have shown different yet close percents over the years, according to the economic indicators of the National Bank of Kuwait, where average growth stood at stood at 5.4% in 2014, then slowed down in 2015 to reach 4.1%, reaching its lowest in 2016 when it stood at 3.2%.
From 2006 to 2015, GGC non-oil GDP recorded a growth of 7.75%, according to the IMF. However, projections see a growth of 3.25% over the next five years.
While previous performances are not an accurate indicator of the expected growth pace of the non-oil sectors, especially given the current immenent need for the Gulf to expand beyond oil, current data still shows that the GCC countries need to augment their efforts to ensure a stable outlook to benefit from the significant potential it enjoys in its non-oil section of the economy.
By Toqa Ezzeldin
