By Md Manzer Hussain

BENGALURU, (Reuters) – The six members of the Gulf Cooperation Council are expected to grow more quickly next year than they previously believed. This is according to a Reuters poll that surveyed economists. They warned that a drop in oil prices would be the greatest threat to their outlook.

   The oil-rich region will benefit from an increased COVID-19 vaccination rate, rising oil prices and easing of lockdown restrictions this year and next, the poll suggested.

These may improve short-term prospects but they also expose the region to its high dependence on oil demand from the global market, which is deteriorating due to slowing economic growth in China. China is the largest crude exporter.

    Still, the Oct. 8-20 Reuters poll of 21 economists forecast an improvement in the economic fortunes of most oil-exporting nations after they were battered by the pandemic and the record collapse in oil prices last year.

    “The outlook for the GCC region has improved over the past few months, with economies benefiting from domestic and global reopening. Maya Senussi (senior economist, Oxford Economics) stated that the rise in oil production will play a critical role in boosting regional GDP in 2022.

   “(But) the recovery will remain uneven across countries given divergent growth strategies.”

Saudi Arabia, which is the world’s biggest exporter, and the economic and political powerhouse of the region, will enjoy 5.1% economic growth in next year. This follows a slight 2.3% increase this year, and an abrupt 4.1% contraction last.

This was an improvement on the July Reuters poll, and higher than the International Monetary Fund’s forecast of 4.8% for 2022.

This would mark the fastest increase in oil prices since 2013 (when it was $109 per barrel). There were forecasts ranging from 2.7%-7.3%.

Goldman Sachs (NYSE) estimated it to be 7.0%. Their expectation is that crude oil which currently trades at about $84 per barrel will drop to $90 by year’s end.

    All GCC economies are highly reliant on oil and gas exports and any disruption in energy prices due to geopolitical tension and a slowdown in the global economy could hurt the recovery.

    It remains vital for GCC countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – to diversify their economies, as oil revenues account for over 70% of total government revenues in most of them, the World Bank said.

    The United Arab Emirates, a global trade hub and the GCC’s second-biggest economy, was forecast to grow 4.6% in 2022, a slight upgrade from the previous poll.

Dubai and seven other emirates have the highest global vaccination rates. The UAE also has minimal pandemic restrictions, which helped to drive strong economic growth.

    “The outlook … is brighter with easing in travel restrictions likely to support tourism and hospitality sectors, while Expo 2020 should result in a bump-up in domestic demand as well,” said Khatija Haque, chief economist at Emirates NBD.

As the economy grows again after last year’s COVID-induced downturn, non-oil revenues are also expected to recover.

Kuwait, Qatar Oman, Oman and Bahrain are expected to grow by more than 3% in the next year.

    When asked what the biggest downside risk is to the GCC economies next year, nine of 10 respondents said a decline in oil and gas prices. Geopolitical disturbances were one of the responses.

    “The region’s high exposure to global oil demand, the uncertainty associated with the path of the pandemic and geopolitical risks … are among the key risk factors clouding the outlook,” said Ilker Domac, an economist at Citi.

    The inflation outlook in the region is modest, but varies. The inflation outlook is for the region to remain around 2%. Qatar’s reading of 2.5% will be the highest, while the United Arab Emirates has the lowest at 1.5%.

(For additional stories in the Reuters global longer-term economic outlook polls bundle: