The UAE and Saudi Arabia are projected to see stronger economic growth, even as regional uncertainty persists due to the ongoing Israel-Iran conflict, according to an analysis released on Friday.
“The UAE’s economy is expected to sustain its robust growth pace, fuelled by rising oil production and strong performance in the non-oil sector, which is being supported by an accommodative fiscal policy,” said James Swanston, MENA economist at Capital Economics.
In early June, Saudi Arabia called on OPEC+ to increase oil output, marking a shift from the voluntary production cuts maintained over the past five years to support global oil prices.
Swanston highlighted that while the increase in oil production is likely to enhance the kingdom’s GDP growth, it may also conceal a slowdown in the non-oil economy as the country implements stricter fiscal consolidation measures.
In recent years, Saudi Arabia’s non-oil GDP has grown at an average rate of around 7%.
The analysis further stated that higher oil output and elevated prices could accelerate GDP growth across the Gulf region. However, oil-importing nations in the MENA region, including Jordan and several North African countries, may face pressure on their balance of payments if the conflict escalates and oil prices rise further.
Oil prices have jumped by more than $10 over the past week due to intensifying geopolitical tensions. Any direct military involvement by the United States could push crude prices even higher.
