Economic activity in the Gulf Cooperation Council (GCC) is set to accelerate in 2021 as the global demand for commodities increases, according to the credit-rating agency AM Best. The agency expects non-oil sector activity to outperform the oil sector in 2021 as the lockdown restrictions due to Covid-19 pandemic ease.
The GCC was hard hit by the pandemic and faced the dual economic shocks of commodity price declines. Notably, there were slowdowns in domestic economic activities. Though the resurgence in global economic activities is expected to contribute to higher commodity prices and progress in vaccination rollouts, the surge in virus cases in GCC and around the globe possesses a great deal of risk and uncertainty.
AM Best places countries into one of five country risk tiers (CRT) that range from CRT-1 to CRT-5. CRT-1 is ranked for countries with a stable environment with the least amount of risk and CRT-5 for those with the most risk. CRTs for the GCC are concentrated in the CRT-3 and CRT-4 tiers with Kuwait, Qatar, Saudi Arabia. The UAE is at CRT-3, while Bahrain and Oman are at CRT-4.
The report states that in 2020, except for Qatar, the GCC economies contracted by more than the 3.3 percent world average drop in GDP. As most countries are moving towards economic normalcy, the non-oil sector economic activity is expected to outpace that of the oil sector in 2021. Even travel and tourism sectors are to show a similar trend.