According to the International statistics, the world economy is projected to increase at 3 percent in 2019— a significant drop from 2017-18 for emerging market and developing economies also advanced economies — before recovering to 3.4 percent in 2020. The global growth pattern reflects that gross domestic product (GDP) growth is predicted to moderate into 2020 and beyond for a group of systemic economies comprising US, Europe, China, and Japan — which together account for close to half of worldwide GDP. It is also revealed that the global economy is in a synchronized slowdown, with growth for 2019 downgraded again — to 3 percent — its slowest pace since the global financial crisis.
Statistics revealed that leading advanced economies continue to slow in 2019 with the US growth projected to slow down to 2.5 percent in thus year from 3 percent in 2018 with the economy projected to slow down more to 2.3 percent in 2020. For the US, trade related uncertainty has had negative effects on investment, but employment and consumption continue to be robust, buoyed also by policy stimulus. In the Euro area, growth has been downgraded due to weak exports, while Brexit-related uncertainty continues to weaken growth in the UK. Large emerging market economies such as Brazil, Mexico, Russia and Saudi Arabia are projected to increase in 2019 about 1 percent or less, considerably below their historical averages.
India’s 2019 GDP growth is revised downwards to 6.1 percent as against to 6.8 percent in 2019. In India, growth softened in 2019 as corporate and environmental regulatory uncertainty, together with concerns about the health of the non-bank financial sector that weighed on demand. China’s growth is projected at 6.1 percent in 2019 as against to 6.6 percent in 2018. On the other hand various economists also recorded that the economies of the GCC recovered in 2018 despite signs of weakness in the global economic outlook, reinforcing the perception that GCC economies’ fortunes are still inextricably tied to oil. The steady rise in oil prices until October 2018 lifted growth in the GCC economies, from an average of -0.2 percent during 2017 to 2.0 percent during 2018. Two of the region’s largest economies Saudi Arabia and Kuwait, also Oman, emerged from recession in 2018. Growth outturns were driven by higher oil production in the second half of 2018, higher capital investment made possible because of the increase in oil revenues, and higher local demand. Fiscal and external balances enhanced, also tracking oil sector performance. GCC countries’ fiscal balances enhanced during 2018, aided by the average rise in oil prices and progress with non-oil revenue mobilization in some countries. Saudi Arabia and the UAE implemented a 5 percent VAT in early 2018, and Bahrain followed in early 2019. Oman introduced excise taxes on tobacco products, energy drinks and soft drinks in mid-2018 and increased corporate income tax.
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According to the International Monetary Fund (IMF) which has revised down projections for economic growth in the Gulf states in 2019 on lower oil output amid heightened worldwide trade tension and after attacks on Saudi infrastructure that hit its production. Its April outlook had forecast 2.1 percent growth in 2019. This fall chiefly reflects oil production cuts in line with OPEC+ agreements. The downward revisions to growth forecasts comes as oil prices have been swinging between $55 a barrel to $75 a barrel since the start of 2019.
The IMF statistics also revealed that this price volatility comes against a backdrop of slowing worldwide growth, trade tensions and geopolitical risks counting recent attacks on Saudi oil facilities that briefly knocked out half of the kingdom’s output. Saudi GDP growth is forecast to slow from 2.4 percent in 2018 to 0.2 percent in 2019, which has slashed the 1.8 percent forecast for 2019 it made in April.
Rising oil and gas production will help lift GCC growth to 2.5 percent in 2020, while warning that lower global demand could still weaken prices with adverse implications for growth. Infrastructure spending in Kuwait, the UAE and Qatar is forecast to lift non-oil GDP growth from 2.4 percent this year to 2.8 percent next year— albeit lower than April’s forecast of 2.9 percent non-oil growth in 2019, growing to 3.3 percent in 2020. Within the GCC, IMF statistics showed that various states need higher oil prices to balance their budgets. Saudi Arabia needs an oil price of $86.5 a barrel, Oman requires $87.3 a barrel and Bahrain $95.1 a barrel.
| Oil Review | ||||||
|---|---|---|---|---|---|---|
| Details | 2007 | 2008 | 2009 | 2010 | 2015 | 2020 |
| GCC crude oil production total, 000 b/d | 15877.2 | 15742.2 | 15752.6 | 15009.7 | 18691.9 | 2411 5.3 |
| % of world demand | 18.4 | 18.4 | 18.7 | 17.6 | 20.2 | 24.4 |
| World oil demand | 86.1 | 85.8 | 84.4 | 85.5 | 92.7 | 98.8 |
| World call on OPEC | 38.4 | 39.0 | 36.6 | 37.0 | 41 .8 | 46.7 |
Given the pressing need to create jobs, the IMF’s experts showed that oil exporters to enhance their business environments to catalyse investment and to focus their public sectors through implementing privatisation and public-private partnerships. Governments could also incentivise private sector employment to reduce lower productivity caused by high public sector wages. Public-private wage gaps need to be contained by more closely linking compensation to performance and improving control over bonuses and allowances.