A survey of almost 440 senior accountancy professionals on economic conditions in MESA showed a recovery in confidence in Q4. A revival in growth is likely to come mainly from the non-oil zone as the economy diversifies.

Detailed in the latest Global Economic Conditions Survey (GECS), together published by ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants) the findings additionally point to mixed outcomes from government spending measures as some economies make greater efforts to boost the non-oil sectors of their economies, e.g. United Arab Emirates (UAE), Qatar and Saudi Arabia.

Commenting on the findings, Fazeela Gopalani, Head of Middle East ACCA, said: A revival in growth is likely to come from the non-oil sector as the economy diversifies. Reforms in the entertainment and tourism sectors are anticipated to raise growth in Saudi Arabia this year. The Q4 GECS recorded a substantial development in orders and confidence compared with Q3, suggesting a brighter outlook. Non-oil private sector growth is likely to support boom in 2020, particularly with the World Expo set to take place in Dubai later in the year.

The dominant impact on confidence in the Middle East region is fluctuations in oil prices. Both confidence and oil costs recovered in Q4 and there was also a lessening of geopolitical risk in the region. Oil prices are expected to be in the $60 to $70 per barrel range this year. A fine improvement for those countries with a fixed exchange rate with the US dollar (Saudi Arabia, United Arab Emirates (UAE), Oman, Bahrain and Qatar) is the reduction in interest rates by the US Federal Reserve. The US cuts in the second half of previous year totaled percentage point and have been immediately followed by reductions of similar size in these countries. In Q4, most of the components of the regional index are barely below their long-run average. This is constant with growth in the place of around 1.5% to 2% in 2019.

Last year GDP growth in Saudi Arabia slowed to much less than %, dragged down by falling oil production and decrease average oil prices. As the largest oil exporter Saudi Arabia is at the forefront of OPEC efforts to stabilize prices by controlling output. Saudi oil output is likely to be reducing again this year as these efforts continue.

There is limited official data available so far on UAE monetary activity in 2019. But survey data points to annual GDP growth of between 1.5% and 2% ultimate year. The GECS orders index averaged -20 over the four quarters of 2019, little modified compared with 2018 (-19), when UAE growth is officially recorded at 1.7%. But the UAEs oil production, which fell 7% previous year, will decline again slightly in 2020 in accordance to the OPEC+ agreement reached last December. Based on the most current GECS orders index values, which were above recent averages, the outlook is for GDP growth this year of around 2%, boosted by non-oil activity.

Speaking of the international picture Michael Taylor, chief economist at ACCA said: Many risks to the global economy in 2020 are the same as in 2019, including trade tensions between the US and China, which were a major cause of slowing international growth. Recent developments in this area have been positive, but risks of a re-escalation with renewed tariff will increase remain.

Fazeela Gopalani concludes: Lower interest rates in the vicinity ought to stimulate private sector credit boom and assist to boost the non-oil private sector economy. The real estate sector, increasingly vital in many economies in the region, will gain particularly from lower borrowing costs. Encouragingly, the regions GECS index that measures problems accessing finance is close to a three-year low in Q4.

GECS Q4 2020 can be seen online at: https://www.accaglobal.com/gb/en/professional-insights/global-economics/GECS_Q4_2020.html