World Bank Expects GCC Economies to Grow 2.2% in 2021

The World Bank said on Wednesday that the Gulf Cooperation Council (GCC) economies will likely grow by a total of 2.2% this year after a 4.8% contraction last year due to the pandemic and low oil prices.

"With recent progress made with the global rollout of the COVID-19 vaccine and with production and trade rebounding worldwide, the prospects for economic recovery are stronger now than they were at the end of last year," The World Bank said in a 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.”

The World Bank said it remains vital for the Gulf Cooperation Council countries, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, to persify their economies, with oil revenues accounting for more than 70% of total government revenues in most countries in the block.

Kuwait and Qatar are expected to impose value-added tax (VAT) this year, similar to other GCC countries that have implemented a revenue persification measure at various stages over the past years.

On the public finance front, it is expected that most of the GCC countries will continue to record deficits in the coming years due to the corona crisis.

The countries with the largest deficits in 2020 such as Bahrain, Kuwait and Oman are expected to remain in deficit until 2023, yet, with better performance than they were during the pandemic's outbreak.

Downside risks to the region is "extremely high" due to the region's heavy exposure to global demand for oil and service industries, despite the recovery in oil prices.

International travel restrictions could also harm the World Expo in Dubai and the 2022 FIFA World Cup in Qatar.