The World Bank predicts the GCC will see slowing economies in 2023

The World Bank expects economic growth in the GCC to slow to 2.5 per cent in 2023, writes Ahmad Abdul-Rahman.

The World Bank (WB) lowered its forecast for the growth of the economies of the Gulf Cooperation Council (GCC) countries to about 2.5 per cent in 2023, down from 3.2 per cent of its forecast last April. However, the WB  raised its forecast for the economies of the Gulf region in 2024 from 3.1 per cent to 3.2 per cent.

The World Bank lowered its forecast for real GDP growth in Saudi Arabia to 2.2 per cent in 2023, compared to its previous forecast of 2.9 per cent last April, expecting non-oil GDP in Saudi Arabia to grow by 4.7 percent for 2023. The WB expected oil GDP to decrease by 2 per cent, and the inflation rate in Saudi Arabia is expected to reach 2.4 per cent. The ratio of total government debt to GDP is expected to reach 24.6 per cent.

Global economic slowdown

In a report issued on May 18 entitled: "The Health and Economic Burden of Non-communicable Diseases in the GCC Countries", the WB attributed the reasons for lowering its forecast for the current year to the decline in hydrocarbon GDP. The WB said that the hydrocarbon GDP is expected to contract by 1.3 per cent this year, after OPEC + announced a voluntary cut in oil production last April. This is in addition to the slowdown in global economic growth that is predicted.

Despite its negative expectations for the GCC countries, the WB reaffirmed the strong growth in the non-oil sectors, expecting growth to reach 4.6 per cent in 2023. It considers that this will reduce the impact of the declining growth of the hydrocarbon sector.

In the report, the WB said: "The structural reforms carried out in the past few years will support growth rates this year." It noted that the improvement of the business climate and competitiveness, and general improvements in the level of women's entry into the fields of work in the GCC countries, especially in Saudi Arabia, would contribute to achieving the desired objectives. The WB attributed this improvement to the Gulf countries' plans to diversify their economies.

The WB called on GCC countries to exert more effort to achieve economic diversification. As the title of its report shows, the bank reviews the cost and repercussions of non-communicable diseases on the economies of the region as the main cause of death and disease. According to the WB, these diseases are responsible for 75 per cent of deaths and disabilities in the GCC.

Of the reported deaths and disabilities, more than 80 per cent are due to four major categories of non-communicable diseases - cardiovascular diseases, diabetes, cancer and respiratory diseases.

This report also highlights the significant cost of non-communicable diseases to the economies of the GCC. A recent study published in the Journal of Medical Economics, a collaborative effort between experts at the WB and key stakeholders from across the GCC, estimated that the direct medical costs of seven major non-communicable diseases amounted to about US$16.7 billion in 2019 alone.

This study also showed the indirect costs on the economies of these countries, through its negative impact on human capital. According to the study, the cost of losses in labour force productivity amounted to more than USD 80 billion in 2019 in the GCC alone, and with population aging, the prevalence of non-communicable diseases, the WB expects these costs to increase in the future.

To mitigate the costs to the region's economies, the WB called for accelerating treatment of the underlying risk factors that cause these diseases in the first place, such as modifiable behavioural risks such as an unhealthy diet, lack of physical exercise, smoking and sugar intake.

As for the environmental risk factors such as air pollution, according to the WB  levels in the GCC exceed the average rates recorded in most countries of the Organization for Economic Co-operation and Development (OECD).

The WB said that many GCC countries have already taken strong measures to address the aforementioned risk factors. These include taxes on tobacco products, smoke and sugary drinks, restrictions or bans on advertising, promotion or sponsorship of tobacco and smoke products, and salt reductions in foods. Many of these countries have also set important environmental targets.

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Friday, 02 June 2023