Video|21 November 2024
MENA | What’s Driving Economic Shifts in the Middle East?
Elliot Garside
Assistant Economist
After losing momentum last quarter, Israel’s GDP beat expectations in Q3, rebounding by 3.8% on an annualised basis. The economy was supported by strong private consumption, exports and fixed investment, particularly by industries. These factors were offset by the 11% drop in public consumption as the government curtails its military efforts. We expect Israel’s GDP to expand by 1.1% this year and 3.7% next year.
In Saudi Arabia, inflation spiked to a year high of 1.9% in October as housing and utilities prices surged. In Kuwait, inflation moderated to 2.4% compared to 2.8% last month, with higher prices in all categories except for transportation. We expect CPI in the GCC to rise by 1.8% this year and 2.3% in 2025.
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For Gulf cities, the near-term outlook will be tied not only to the global macroeconomic backdrop, but also the progress of the diverse visions and strategies in the region. With the aim to diversify their economies and reduce the dependence on oil, Gulf states continue to invest in the non-oil economy and implement various reforms. That said, oil revenues remain key to funding diversification efforts.
The military escalation between Iran and Israel has ratcheted up fears of an expanded Middle East conflict. The threat of counter strikes by Israel is clearly heightened, but we think both sides will ultimately seek to avoid a costly all-out war.
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