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Saudi Arabia’s economic growth will accelerate in 2025 as oil taps open

Saudi Arabia’s economic growth will accelerate in 2025 as oil taps open

By Anant Chandak

BENGALURU (Reuters) – Economic growth in Saudi Arabia next year will improve after two years of modest performance thanks to higher oil production, according to a Reuters poll of economists who also forecast robust growth for other Gulf Cooperation Council (GCC) states accelerate.

The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, has been cutting oil production since late 2022 but is expected to increase output in December, likely leading to higher revenues for the six GCC countries.

Crude oil prices are expected to remain broadly weak, averaging $76.75 a barrel next year, up from about $74.8 currently, according to a separate Reuters poll. [O/POLL]

Saudi Arabia, the world’s largest crude oil exporter, is reportedly preparing to abandon its unofficial target of reaching $100 a barrel. This will allow the Kingdom to reverse previous production cuts and increase market share, which, along with non-oil revenue growth, will contribute to faster economic growth.

The Oct. 9-22 Reuters poll of 21 economists forecast the Saudi economy will grow 4.4% in 2025, the fastest in three years and up from the expected 1.3% this year.

GCC economies were forecast to grow by an average of 4.1% next year, higher than the 3.7% expected in a July survey and faster than the 1.8% growth forecast for 2024.

“We expect the impact of lower oil prices and higher production volumes to largely offset each other. As growth is focused on volumes produced, real GDP growth will continue to benefit and accelerate in 2025 compared to 2024,” said Ralf Wiegert, head of MENA economics at S&P Global Market Intelligence.

Major economies in the region, Saudi Arabia, the United Arab Emirates and Qatar, have been looking for ways to diversify away from dependence on oil as their main source of income, with many economists predicting that the growth rate of non-oil GDP will be largely in line will stand with oil GDP next year.

“However, oil revenues will play a crucial role for all three economies. Even in the long term, non-oil revenues will not be able to replace oil revenues,” Wiegert said.

The UAE economy is expected to be the fastest growing in the region next year at 4.9%, up from 3.7% in 2024. Economic growth in Qatar is expected to reach 2, 7% accelerate, up from 2.1%.

“The UAE economy will be the leader in terms of economic growth in 2025. If OPEC+ opens the taps, the United Arab Emirates is expected to gain even more as its base oil production quota has been increased twice without allowing it to start producing oil. “We benefit from that,” said James Swanston, an economist at Capital Economics.