Middle East Economy Watch

February 2019

Oil falters but the Middle East’s outlook is still benign

2018 was the best in five years for Middle Eastern oil exporters.

Stronger prices, combined with the fiscal and structural reforms that were developed during the low parts of the commodities cycle (including subsidy cuts), put these economies on a more stable footing for 2019. Regional connectedness from remittances, tourism, aid and investment should also result in some positive spillovers to oil importing countries

The oil market correction and broader global economic risks in the final quarter dampened the animal spirits that had begun to emerge last summer.

Furthermore, according to our survey of CEOs in the region, confidence is down.  CEOs appear to be concerned about lower growth, changing customer demands and the rise of disrupting technology.  (see: Chart of the Quarter).

This issue of Middle East Economy Watch previews the outlook for 2019. We also take a deep dive into the economic impact of the VAT roll out in the UAE and Saudi Arabia. With some caveats, the early data suggests that the inflationary impact of the tax has been contained, the impact on growth is limited and in Saudi Arabia it has raised more revenue than was initially expected. A fuller picture will emerge over the next six months or so, including from studying Bahrain, which joined the VAT club this year.

Meanwhile, political developments continue to shape economic and business prospects in the region. Iraq has a new government, albeit with a few posts still unfilled. A lack of stability and good governance has held Iraq back and there is a chance it could turn a page in 2019.

Contact us

Hani Ashkar

Middle East Senior Partner, PwC Middle East

Tel: +971 4 304 3100

Stephen Anderson

Clients 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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