Regional inflation increased in August, with Israel’s rate rising to 3.6% from 3.2% due to higher food and transport costs. Saudi Arabia’s inflation also climbed to 1.6%, driven by food and personal goods prices. Despite pressures from housing rent, Saudi inflation has remained around 1.5% and is expected to stay contained this year.
S&P Global Ratings has given Saudi Arabia a positive outlook, highlighting progress under Vision 2030. Despite challenges from global oil market volatility and lower oil prices affecting the government deficit, non-oil sectors are flourishing, boosted by investments in tourism, construction, and public projects. The non-oil sector is anticipated to grow by 5% this year.
GCC Economic Growth
Efforts to reform the GCC economies have bolstered non-energy sectors, which are now key drivers of growth. Despite oil output cuts, economic expansion is expected to continue, with low inflation. However, these cuts impact public finances, necessitating realistic spending plans, particularly in Saudi Arabia.
Middle East Recovery
While oil output cuts will affect the GCC outlook into 2024, growth is poised to improve thanks to strong non-energy sectors. Positive factors are emerging despite domestic and external challenges.
Gulf Cities’ Economic Outlook
The economic future of Gulf cities is linked to global economic conditions and regional strategies aimed at diversifying away from oil. Investments in the non-oil economy and various reforms are ongoing, though oil revenues remain crucial for funding these efforts.
Iran-Israel Tensions
Recent military escalations between Iran and Israel have raised fears of a larger conflict. While the threat of counter strikes by Israel is high, both sides are expected to avoid a full-scale war.
Contact Information
Matthew Pritchard
Head of Business Development, Middle East
Matthew leads the subscriptions sales team, focusing on strategic and commercial activities in the Middle East. Based in Dubai since 2021, he previously worked as a Sales Director at Fitch Solutions. He holds a Master’s degree in Management and a Bachelor’s degree in Philosophy from the University of Sheffield.
Scott Livermore
Chief Economist, Oxford Economics Middle East, and Managing Director
Scott leads major projects in the GCC and Asia, including macroeconomic modelling and policy impact assessments. He has extensive experience in economic forecasting and consultancy, having rejoined Oxford Economics in 2005 after working with the Slovak Republic’s Ministry of Finance. Scott holds a degree in Philosophy, Politics, and Economics from Oxford University and an MSc in Economics from University College London.
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