ICAEW sees positive economic outlook for the Middle East

Economic growth in the Middle East is projected to rise to 3.5% in 2025, up from at 2.1% in 2024, according to the latest ICAEW Economic Insight report for the region, driven by the expected unwinding of oil production cuts by OPEC+ and continued strength in non-energy sectors

The extension of oil production cuts by OPEC+ has led to a slight downward revision of the GCC's 2024 growth forecast to 2.1% from 2.2% three months ago. While this reflects the temporary impact on the region’s energy sector, the outlook for 2025 remains optimistic as oil production increases, providing a strong boost to the region's economies. The GCC region is poised for a significant rebound, with growth projected to more than double to 4.4% in 2025 as oil production cuts are gradually phased out.

Resilient non-energy sectors

The report, prepared by Oxford Economics, highlights the resilience of the GCC's non-energy sectors, which are expected to expand by 4.4% in 2025. Strong domestic momentum, along with anticipated interest rate reductions, is expected to boost consumption and private investment, while non-oil sectors including tourism, trade, and finance, are becoming crucial growth drivers in the region’s economic diversification efforts.

Kuwait's economy is forecast to grow by only 0.5% due to ongoing oil production cuts, but is expected to rebound to 2.5% in 2025-26. The recent discovery of the Al-Nokhatha oil field, with estimated reserves of 3.2bn barrels, will have a positive impact on the oil sector, supporting Kuwait's aim to expand production output to 4mn barrels per day by 2035.

Oman's economy is projected to achieve a growth rate of 1.5% in 2024, supported by a resilient non-energy sector, rising to 2.3% in 2025, as oil production restrictions are eased. Oman's public finances remain robust, and the country's commitment to fiscal reforms and diversification efforts has resulted in Moody's upgrading Oman's Ba1 credit rating to positive.

Hanadi Khalife, head of Middle East, ICAEW, said, “The report underscores the importance of resilience in navigating global economic and regional geopolitical headwinds. We are confident that the Middle East's business community, supported by the expertise of the accountancy profession, will continue to demonstrate its ability to innovate and thrive amid these challenges.”

Scott Livermore, ICAEW economic advisor, and chief economist and managing director, Oxford Economics Middle East, said, “The GCC’s proactive and strategic investment in non-oil sectors, alongside the gradual recovery of oil production, is paving the way for robust growth in 2025. In a global environment of slowing economic growth, the resilience of the GCC stands out. The region’s strong performance across both energy and non-energy sectors – particularly in tourism, trade, and finance – positions it for sustained success in the coming year.”