GCC economies expected to grow 2.2% this year, says World Bank

Reuters

Published Aug 04, 2021 09:06AM ET

Updated Aug 04, 2021 09:32AM ET

By Davide Barbuscia

DUBAI (Reuters) -Economies of the Gulf Cooperation Council (GCC) will likely grow at an aggregate 2.2% this year after a 4.8% contraction last year caused by the pandemic and lower oil prices, the World Bank said on Wednesday.

"With recent progress made with the rollout of the COVID-19 vaccine globally and with the revival of production and trade worldwide, the prospects for an economic recovery are firmer now than at the end of last year," it said in a research report.

"Although downside risks remain, the forecast stands for an aggregate GCC economic turnaround of 2.2% in 2021 and an annual average growth of 3.3% in 2022–23."

It remains vital for GCC countries - which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates - to diversify their economies, the World Bank said, as oil revenues account for over 70% of total government revenues in most GCC countries.

It said it expects Kuwait and Qatar to introduce a value-added tax this year, following the example of other GCC states that have implemented the revenue-diversifying measure in different phases over the last few years.

On the fiscal side, most GCC countries are expected to continue to post deficits over the coming years, the World Bank said, after shortfalls intensified last year because of the coronavirus crisis.

The countries that posted the largest deficits in 2020 - Bahrain, Kuwait and Oman - are expected to remain in deficit until 2023, but with narrower ratios than in the 2020 downturn.