Middle East Economy Watch

October 2019

Investment reforms and 2020 events offer growth prospects for the GCC

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The attacks on Saudi oil facilities took place as this report was going to press - we continue to monitor the situation and any wider implications closely. Prior to this incident, 2019 had been a relatively slow year economically for the Middle East. This was partly a result of muted oil prices (which were hovering around $60 in mid-September) and continued limits on oil production, requiring fiscal restraint in several countries. In addition, various cyclical factors and a supply overhand in the real estate sector have contributed to continued deflation in much of the region. Real growth rates in Q1 2019, where they are available, have been broadly in line with 2018 performance, showing about 2% growth in the GCC and slightly higher in the rest of MENA.

However, looking beyond the current indicators, significant groundwork is being laid down in markets and legislation that should drive future growth. In this issue, we have focused on the key changes that have been underway in the landscape for foreign investment and public-private partnerships (PPP). There is a broad trend of reforms across the region, in both the oil exporting and importing countries, to modernise legislation and enhance the business environment.

We also look at the growing interest in the Gulf by emerging market equity and bond investors, made possible by capital market reforms. Inflows of portfolio investment should increase the scope of financing for both the public and private sectors. This should help the region grow and develop despite turbulence in the oil market.

As we look ahead, it is notable that the region will be hosting two major global events in 2020: the Expo in Dubai and the G20 summit in Saudi Arabia. Expo is expected to have a significant economic impact for Dubai, and we forecast that it is likely to result in it becoming the second most visited city in the world in 2020 (see article below). The challenge will be to ensure the temporary uptick in activity driven by the event can be translated into longer term growth. There is good reason to think that Dubai will be able to do this.

Although the G20 is a much smaller scale event, and will have little direct economic impact, it will play a similar role in terms of profile, showcasing some of the social and economic reform changes that have been underway in recent years, and potentially catalysing future investment.

Contact us

Hani Ashkar

Middle East Senior Partner, PwC Middle East

Tel: +971 4 304 3100

Stephen Anderson

Middle East Strategy and Markets Leader, PwC Middle East

Tel: +971 4 304 3100

Richard Boxshall

Middle East Senior Economist, PwC Middle East

Tel: +971 4 304 3100

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