Middle East Economy: Strong Despite Oil Reductions and Instability
Amid oil cutbacks and geopolitical tensions, the Middle East’s economy stays resilient, driven by strong non-oil sector growth in the UAE and Saudi Arabia.
3 min
Despite facing setbacks from oil production cuts and ongoing geopolitical conflicts, the Middle East’s economy demonstrates resilience, particularly due to significant growth in the non-oil sectors of the United Arab Emirates (UAE) and Saudi Arabia. Economists point to a robust performance in these sectors as a key factor in maintaining regional economic stability.
According to the “Middle East Economy Watch” report by PwC, the strength of the Middle East economy can largely be attributed to the solid growth in the non-oil GDP of Saudi Arabia and the UAE, alongside positive Purchasing Manager Indices (PMI) in these countries. These indicators suggest continued expansion in the early parts of 2024, signaling a robust economic trajectory.
Milestones in Economic Diversification
The UAE has marked a groundbreaking achievement in its economic diversification efforts, with its non-oil sector now comprising 73% of the nation’s total GDP—a historic first for the country. Abdullah bin Touq Al Marri, the Minister of Economy, highlighted this milestone as a testament to the global private sector and investors’ trust in the UAE’s investment climate. He further projected that the economy of the Arab world’s second-largest nation is set to expand by as much as 5.0% in 2024.
Saudi Arabia, as the world’s leading oil exporter, is actively reshaping its economy through the Vision 2030 diversification agenda. Despite a contraction last year due to oil output cuts, the kingdom’s economy is forecasted to grow, thanks to initiatives aimed at reducing oil dependency and bolstering non-oil sectors like technology and tourism.
The Role of Green Finance in Regional Development
Stephen Anderson, partner, Middle East Strategy leader at PwC Middle East mentioned that the region’s focus on sustainability and economic diversification has led to a surge in green finance, enhancing its attractiveness to foreign investors.
The report also highlighted that the success of events like COP28 and the introduction of green finance frameworks have further accelerated this trend, doubling the issuance of green bonds and sukuk in the Middle East in 2023.
With countries like Oman and Qatar introducing sustainable finance frameworks and green bond initiatives, the Middle East continues to build momentum in green financing. This shift not only supports economic diversification and job creation but also draws significant Foreign Direct Investment (FDI).
Navigating Oil Cuts and Sector Growth
Production reductions in the oil sector have been prolonged, yet the non-oil industries continue to thrive: OPEC+ nations have consented to carry forward the cuts in oil production into the year’s second quarter, acknowledging the decelerated demand growth for oil as well as the potential for heightened supply from countries outside the OPEC+ alliance. These continued cuts suggest a probable contraction in the oil sector for 2024 relative to the previous year.
Meanwhile, Saudi Arabia has decided to temporarily pause its ambition to boost oil production capabilities, considering the current supply and demand scenario. This decision, however, is expected to redirect funds towards investments in alternative energy initiatives, including those in gas and renewable energy sectors.
Qatar’s ambitious plans to expand its liquefied natural gas (LNG) production capacity and the exploration of alternative trade routes highlight the region’s strategic adaptations to global energy and trade dynamics. These developments indicate a broader shift towards more sustainable and diversified economic practices.
According to PwC economists, despite oil market fluctuations and geopolitical concerns, the Middle East’s economy is poised for growth, driven by robust non-oil sectors, significant strides in economic diversification, and a growing emphasis on sustainable finance.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
This agreement aims to foster the development of robust partnerships between the communities of both regions.
4 min
The Australian Chamber of Commerce and Industry has recently signed a Memorandum of Understanding (MoU) with the Dubai Chambers, marking a significant step towards enhancing cooperation and strengthening economic and trade relations between Dubai and Australia. This strategic agreement aims to foster the development of robust partnerships between the business communities in both regions.
In today’s interview, we will delve with Mr. Lyall Gorman, Vice President of the Australian Chamber of Commerce and Industry, into the objectives and anticipated impacts of this MoU, explore the key initiatives and projects that will arise from this collaboration, and discuss the potential challenges and strategies for overcoming them.
We will also look into how this agreement aligns with the broader strategic goals of the Australian Chamber of Commerce and Industry and the future of trade relations between Australia and the Middle East.
Can you give us a brief overview of the MoU signed with the Dubai Chamber? What are the main objectives?
The MoU we signed is designed for the two chambers to collaborate for mutual benefit and interest, focusing on business-to-business interactions. We are currently exploring opportunities around delegations, information sharing, trade, commerce, and e-commerce. The main goal is to bring businesses together in a structured manner to share ideas and encourage positive outcomes.
This partnership aims to increase the understanding of each other’s economies, recognize opportunities in each other’s regions, and work together to create mutual benefits. By doing that, we hope to enhance the economic ties between Dubai and Australia, leveraging each other’s strengths to create a more dynamic and prosperous business environment.
How do you see this MoU impacting trade relations between Australia and Dubai in the short and long term?
In the short term, we are expecting to generate a significant increase in awareness. By sharing information, data, and demographic insights, we will gain a better understanding of each other’s economic environments. This will help us identify existing opportunities for collaboration and potential mutual investment. From a trade perspective, we anticipate increased exports from Australia to Dubai and vice versa. This could include areas such as disruptive technology, medical research, education, construction, and agriculture—sectors that are currently emerging and critical.
In the long term, this enhanced understanding and collaboration will allow us to identify and capitalize on more opportunities. It’s about recognizing what’s happening in each other’s regions, understanding potential opportunities, and working together to create economic value. By fostering a deeper economic connection, we aim to create sustainable growth and mutual benefits over time.
What sectors or industries do you see as the primary beneficiaries of this partnership?
There are several mutual opportunities we aim to explore. Dubai has evolved incredibly over the last 20 years, achieving remarkable growth. However, there are still areas where further cooperation can drive growth. Some of the key initiatives will focus on sectors such as AI, digital disruptive technologies, smart technologies, financial services, education, construction, and advanced technologies.
Australia is highly regarded for its building codes and manufacturing capacity, especially in the construction sector. Additionally, I believe food security presents an interesting opportunity. As a major exporter of meat and other food products, Australia can contribute significantly to food security discussions, which is particularly relevant for Dubai.
Education is another area with significant potential for collaboration. By exploring these sectors, we aim to implement projects that not only address current challenges but also pave the way for sustainable development and innovative solutions in both regions.
What challenges do you foresee in the implementation of this MoU, and how do you plan to address them?
The cultural differences can impact how business is conducted, and this requires careful navigation. To address this, we need open and transparent communication, fostering a spirit of collaboration and mutual respect. It’s essential to have a genuine desire to embrace each other’s cultural differences and find common ground.
Another potential challenge is ensuring that both sides fully understand and adapt to each other’s regulatory environments and market dynamics. Dubai has matured significantly into a global business and corporate hub, which helps, but there are still differences to consider.
By prioritizing understanding and respect, and committing to ongoing learning from each other, we can effectively manage these challenges. Working together in a considerate and respectful manner will be crucial in overcoming any hurdles that may arise during the implementation of this MoU.
How does this MoU align with ACCI’s broader strategic goals for international trade and collaboration?
This MoU aligns closely with ACCI’s broader strategic goals by emphasizing the importance of fostering and diversifying economic partnerships on a global basis. The current global geopolitical situation has underscored the need for diversifying our supply chains and business relationships.
From an Australian perspective, the lessons learned during the COVID-19 pandemic and the evolving geopolitical environment have further highlighted the necessity of expanding our economic partnerships.
The Middle East, including the GCC, are regions where Australia already has strong relationships that can be further strengthened. Therefore, by working together, collaborating, and sharing knowledge and forward-thinking ideas, this MoU will help us identify and shape initiatives that add value and align with our strategic goals for international trade and collaboration.
How do you envision the future of trade relations between Australia and the Middle
I believe it will become stronger, more robust, and more regular, all for mutual benefit. There is a genuine willingness between both regions to grow and expand this relationship through a partnership model rather than a transactional one. This approach involves setting short, medium, and long-term goals, fostering a thriving and enduring relationship.
We have already established a strong partnership with Dubai Chambers and maintain a good relationship with the Dubai International Chamber here in Australia, led by Sophia Demetriades Toftdahl. This aligns with our strategic goal of global diversification in business.
Additionally, we recently signed an MoU with the Qatar Chamber and are about to sign with the Abu Dhabi Chamber as well.
Engaging with Saudi Arabia also makes sense, as it is a significantly emerging country. The last few years under new leadership have brought clarity to its economic, political, and social future and a strong passion and drive to become a major player in the region and global stage
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
