Despite the ongoing conflict between Israel and Iran, the UAE and Saudi Arabia are projected to see stronger economic growth, as stated in a recent analysis.
The UAE’s economy is expected to continue its robust expansion, fueled by increased oil production and a strong non-oil sector, supported by flexible fiscal policies, according to James Swanston, a MENA economist at Capital Economics.
Meanwhile, Saudi Arabia has recently advocated for OPEC+ to boost oil production, reversing earlier cuts aimed at price support. Swanston suggests that while this higher oil output will likely boost Saudi Arabia’s overall economic growth, it might also obscure a slowdown in the non-oil sector due to stricter government spending cuts. (Saudi Arabia’s non-oil GDP has typically grown around 7% annually in recent years.)
The report also indicates that increased oil output and prices could accelerate GDP growth across all Gulf economies. However, oil-importing countries in the MENA region, like Jordan and several North African nations, could face balance of payments challenges if the conflict intensifies and oil prices rise further.
Currently, oil prices have already climbed by over $10 in the past week due to increased geopolitical tensions, and potential US military involvement could drive crude prices even higher.
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