Saudi Arabia's economic growth is set to accelerate next year, driven by increased oil production following two years of moderate performance, according to a poll of economists. The forecast also predicts strong growth for other Gulf Cooperation Council (GCC) states. OPEC+, the coalition of oil-producing nations led by Russia, has been reducing oil output since late 2022, but production is expected to rise in December, probably to enhance revenues for the six GCC countries.
Saudi Arabia, the world's largest exporter of crude oil, is reportedly preparing to abandon its unofficial target of reaching $100 per barrel. This will allow the kingdom to reverse past production cuts and increase market share, which along with non-oil revenue growth, will help drive faster economic growth.
"We expect the effects of lower oil prices and higher production volumes (to) largely (offset) each other. Since growth is focusing on produced volumes, real GDP growth will still benefit and accelerate in 2025 relative to 2024", said Ralf Wiegert, head of MENA economics at S&P Global Market Intelligence.
Prominent economies in the region, Saudi Arabia, the United Arab Emirates, and Qatar, have been exploring ways to diversify from relying on oil as their main revenue source, with many economists predicting the growth rate in non-oil GDP will be largely in line with oil GDP next year.
The UAE economy is expected to be the fastest growing in the region at 4.9% next year, up from 3.7% in 2024. Qatar's economic growth is projected to accelerate to 2.7% in 2025, up from 2.1%.
"However, oil revenues will play a critical role for all of the three economies. Even in the long-term outlook, non-oil revenues will be unable to replace oil revenues", Wiegert said.
"The UAE's economy will be the star performer in terms of economic growth in 2025. If OPEC+ is set to open the taps up, the UAE will stand to gain more as it has had its base oil output quota raised twice without being able to take advantage of that", said James Swanston, an economist at Capital Economics.
"Qatar and the UAE are further along in their diversification efforts and are better placed in a world approaching peak oil demand. In particular, UAE has a much larger non-oil economy and, exemplified by Dubai, can sustain tourism, financial services, and not rely as much on oil".