GULF ECONOMIC UPDATE Unlocking Prosperity: Transforming Education for Economic Breakthrough in the GCC Spring 2024 Gulf Economic Update Unlocking Prosperity: Transforming Education for Economic Breakthrough in the GCC Spring 2024 Middle East and North Africa Region © 2024 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or fail- ure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immuni- ties of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover photos courtesy of: (top): Digital Saint/www.shutterstock.com (center, left): Ahmed Hamdy Hassan/www.shutterstock.com (center, right): Jojje/www.shutterstock.com (bottom): Kenchiro168/www.shutterstock.com Further permission required for reuse. Publication design and layout by The Word Express, Inc. TABLE OF CONTENTS Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Foreword Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii ‫ملخص تنفيذي‬ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii 1. Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Outlook and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 3. Special Focus: Unlocking Prosperity: Transforming Education for Economic Breakthrough in the GCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 I. Education is a driver of economic growth when it translates into learning. . . . . . . . . . . . . . . . . . . . . . . . . 19 II. Learning outcomes have improved in GCC countries over the past several years. . . . . . . . . . . . . . . . . . 20 III. Despite recent improvements, there is scope for GCC countries to further improve in learning outcomes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 IV. Improving education quality would lead to substantial economic gains for GCC countries. . . . . . . . . . .25 V. Pathway to improving quality of education in the GCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Annex 1. GCC Summary Statistics Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Annex 2. Country Summary Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 iii List of Figures Figure 1 Slowdown in GCC regional economic activity during 2023 primarily due to a contraction in oil activities… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 2 …while non-oil sectors continued strong performance supported by private and government consumption and investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 3 Clear divergence in individual country performance during 2023… . . . . . . . . . . . . . . . . . . . . . 4 Figure 4 …while PMI survey comfortably indicating expansion during Q1-2024. . . . . . . . . . . . . . . . . . . 4 Figure 5 Regional inflation remained lower than many regional peers… . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 6 GCC central banks raised rates following the Federal Reserve's monetary tightening. . . . . . 4 Figure 7 Regional fiscal surplus narrowed while non-oil fiscal balance continued to improve supported by non-oil sector activities... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Figure 8 …with debt levels broadly staying stable and below MENA average in most GCC countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Figure 9 Regional current account surplus narrowed in 2023 with declining oil receipts... . . . . . . . . . .7 Figure 10 …meanwhile, international reserves remain at elevated levels and provide resiliency against shocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 11 Diversification and non-oil sector development are advancing in most GCC countries… . . . 8 Figure 12 …significantly impacting labor market dynamics and female employment opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 13 MENA’s growth is expected to return in 2024 to its pre-pandemic growth level… . . . . . . . . .12 Figure 14 …while oil prices moderate to reflect uncertainties surrounding oil markets. . . . . . . . . . . . . .12 Figure 15 GDP growth rebounds from 2023 but remains soft, with faster growth anticipated ahead… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 16 …driven primarily by private consumption, investments, and looser fiscal policy. . . . . . . . . .13 Figure 17 All GCC countries are projected to register a rebound in GDP growth rates supported primarily by non-oil sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Figure 18 GCC inflation remains contained and relatively low… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Figure 19 …GCC banks' credit growth is slowing, except for Saudi Arabia and Kuwait banks. . . . . . . 15 Figure 20 The GCC region is projected to register a narrow surplus in 2024 before widening in the medium term… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 21 …with divergence in individual country’s positions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 22 Overall, debt-to-GDP ratio is on a declining trajectory for most GCC countries… . . . . . . . . . 17 Figure 23 …and large fiscal buffers provide resilience against future external shocks. . . . . . . . . . . . . . 17 Figure 24 Current balance surplus is expected to narrow before expanding in the medium term… 18 Figure 25 ...mainly due to oil production cuts in 2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Figure 26 Trends in average fourth grade achievement (PIRLS and TIMSS) . . . . . . . . . . . . . . . . . . . . . .20 Figure 27 Trends in average eighth grade achievement (TIMSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Figure 28 Trends in 15-year-olds' average achievement (PISA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Figure 29 Score difference between girls and boys across subjects . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Figure 30 Percentage of students at each benchmark of PIRLS 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Figure 31 Share of grade eight students asked to memorize facts/principles by their science teachers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Figure 32 Pre-primary gross enrollment rate in GCC and high-income countries (1975–2020) . . . . . .24 iv GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC List of Tables Table 1 Differences with respect to PIRLS 2021 and PISA 2022 average . . . . . . . . . . . . . . . . . . . . . . 22 Table 2 HCI 2020 by component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 List of Boxes Box 1 OPEC+ Decisions and Implications on GCC Economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Box 2 Tracking Recent Structural Reforms (focusing on Q4-2023 and Q1-2024) . . . . . . . . . . . . . . . 9 TABLE OF CONTENTS  v ACRONYMS ADNOC The Abu Dhabi National Oil Company LNG Liquefied Natural Gas AML Anti-Money Laundering MENA Middle East and North Africa BHR Kingdom of Bahrain MHRSD Ministry of Human Resources and CFT Combating the Financing of Terrorism Social Development CIT Corporate Income Tax MTFP Medium-Term Fiscal Balance Plan CPI Consumer Price Index NIF National Infrastructure Fund FDI Foreign Direct Investment OECD Organization for Economic FBP Fiscal Balance Program Co-operation and Development FED Federal Reserve Board OMN Sultanate of Oman FGF Future Generations Fund OPEC Organization of the Petroleum FLFPR Female Labor Force Participation Rate Exporting Countries GCC Gulf Cooperation Council PIF Public Investment Fund GDP Gross Domestic Product PMI Purchasing Managers’ Index GRE Government-Related Entity QTR State of Qatar HRDF The Human Resources Development SANED Unemployment Insurance Scheme Fund TVET Technical and Vocational Education ICT Information and Communication and Training Technology TVTC Technical Vocational and Training ILO International Labor Organization Corporation KSA Kingdom of Saudi Arabia UAE United Arab Emirates KWT State of Kuwait vii PREFACE T he Gulf Economic Update (GEU) is the prod- comments on preliminary drafts of the report from uct of the Middle East and North Africa unit in Hoda Youssef (Lead Economist/ Program Leader), the Macroeconomics, Trade, and Investment Harry Patrinos (Senior Advisor), Amira Kazem (Senior (MTI) Global Practice at the World Bank Group. It pro- Operations Specialist), and Anna Boni (Senior vides an update on key economic developments and Education Specialist). policies in the Gulf Cooperation Council (GCC) coun- The GEU was completed under the guidance tries over the past six months, places them in a longer- of Eric Le Borgne (Practice Manager); the Special term and global context, and assesses the implications Focus was developed under guidance from Andreas of these developments and other changes in policy Blom (Education Practice Manager). Safaa Tayeb El on the outlook for the GCC. Its coverage ranges from Kogali (Country Director) authorized the publication. the macro-economy to financial markets to indicators The findings, interpretations, and conclusions of human welfare and development. It is intended for expressed in this report are those of the World Bank a wide audience, including policymakers, business staff and do not necessarily reflect the views of the leaders, financial market participants, and the com- Executive Board of The World Bank or the govern- munity of analysts and professionals engaged in the ments they represent. GCC. The data cut-off for this report is April 30, 2024. For questions and comments on the content of The Macroeconomics section of the report this publication, please contact Khaled Alhmoud (kal- was led by Khaled Alhmoud (Senior Economist) and hmoud@worldbank.org). For media communication, co-authored by Olena Ftomova and Xinyue Wang please contact Ashraf Al-Saeed (aalsaeed@world- (Economists). The authors are grateful to Ashwaq bank.org), Shahd Alhamdan (salhamdan@worldbank. Maseeh (Research Analyst) for her inputs and contri- org) and Saleh Alobaidi (salobaidi@worldbank.org). butions, and to Ekaterina Georgieva Stefanova (Senior To be included on an email distribution list for this Program Assistant) for administrative support. The or other related publications, please contact Mariem Special Focus section was led by Mahmoud Elsayed Sghaier (msghaier@worldbank.org). For information (Senior Economist) and co-authored by Angelica about the World Bank and its activities in the GCC, Rivera-Olvera (Education Researcher), Aidan Clerkin including e-copies of this publication, please visit (Education Researcher), and Shwetlena Sabarwal (www.worldbank.org/en/country/gcc). (Lead Economist). The authors received invaluable Translation Services by Mirna Tabet. ix From the Country Director, GCC Countries Middle East and North Africa Region, World Bank Group SAFAA EL-TAYEB EL-KOGALI FOREWORD MESSAGE T he commitment of the Gulf Cooperation presents major risks to the region and the GCC out- Council (GCC) countries to diversifying their look if it extends or expands to include other regional economies highlights their strategic approach players. While intensification of armed conflicts and to fostering resilience and sustainable development geopolitical tensions may precipitate higher oil prices during a volatile global economic period. After the which would result in windfall revenues to the GCC strong growth in 2022, the GCC region´s perfor- region, it may also weaken regional financial and mance eased in 2023 driven by OPEC+ production trade markets as well as overall economic confi- cuts. Meanwhile, regional non-oil sectors continued dence. Moreover, the GCC—like many other coun- to post robust growth reflecting ongoing structural tries—are increasingly vulnerable to climate change reforms and efforts to diversify the economy from the and severe weather-related disasters, like the unprec- hydrocarbon sector. The GCC countries have also edented flooding recently witnessed in Oman and the used their financial muscle to support economically UAE. Enhanced investments in climate adaptation are vulnerable countries in the region. essential to mitigate future economic and humanitar- Regional prospects are encouraging for real ian risks. GDP growth for both 2024 and 2025. The rebound Globally, weaker-than-expected growth in is not just due to anticipated recovery in oil output, China, triggered for instance by a more prolonged as OPEC+ relaxes production quotas, but also builds and deeper property sector downturn, could also on the momentum of the non-oil economy, which is have notable negative spillovers. In addition, the per- expected to continue to expand at a robust pace over sistence of above-target inflation in advanced econo- the medium term. As a result, fiscal and external bal- mies suggests that interest rates may remain higher ance positions are projected to strengthen which will for longer. rebuild financial buffers, pay off debt, and deepen The Special Focus section of this report dis- sovereign wealth funds. Continued prudent macro- cusses the importance of education quality in foster- economic management and a focus on increasing ing long term economic growth in GCC countries. The non-oil exports will be important to sustain diversifica- section presents an overview of learning outcomes tion away from hydrocarbon dependence. over time and relative to peer countries which pro- Downside risks remain and it would be amiss vides a benchmark against which GCC policymakers not to mention them. The conflict in the Middle East can identify gaps and draw lessons for improvement. xi Education is a fundamental pillar for equitable and the quality of education they receive. Without qual- sustainable growth and development. A child born ity education that translates into learning, GCC coun- today in the GCC is expected to reach only 62 per- tries will not be able to realize the full potential of their cent of her/his potential productivity, mainly due to human capital. xii GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC EXECUTIVE SUMMARY T he GCC region endured an economic between oil and non-oil sector performances. slowdown in 2023, only registering 0.7 This progress underscored the efficacy of ongoing percent growth, due primarily to stringent structural reforms that bolster private consumption OPEC+ production cuts. The slowdown was com- and investment. Diversification is critical in mitigating pounded by tightening global monetary conditions the impacts of oil price volatility, with notable improve- and ongoing geopolitical tensions, adding layers ments observed in tourism, renewable energy, finan- of uncertainty to the economic landscape. Despite cial services, and digital transformation. Simultaneous these challenges, the non-oil sectors across the GCC labor market reforms aimed at enhancing workforce demonstrated resilience, growing by 3.9 percent in participation further reinforced these diversification 2023, underpinned by robust structural reforms and efforts and facilitated inclusive growth and economic sustained investments. Inflationary pressures were prosperity. effectively managed through vigilant monetary poli- With a projected global economic slow- cies that aligned with global trends. down extending into the third consecutive year, Fiscal and external balance surpluses nar- the economic outlook for the GCC in 2024 is rowed significantly in 2023 compared to the expected to significantly depend on oil output previous year reflecting weaker oil receipts. and prices. Regional GDP growth is projected to The regional fiscal surplus reached 0.5 percent of recover to 2.8 percent in 2024 before accelerating GDP (down from 5.5 percent in 2022) while the cur- further to 4.7 percent in 2025. With oil production rent account surplus registered 8.4 percent of GDP quotas expected to be gradually lifted during the sec- (from 15.7 percent in 2022). Governments in the ond half of 2024, oil GDP is expected to grow by 1.7 region continued efforts to diversify non-oil revenues percent this year before ramping up aggressively in through taxes and fees; however, these revenues are 2025 to reach 6.9 percent. Meanwhile, non-oil GDP still insufficient to offset the eventual declines in oil should remain robust and expand by 3.6 percent in income. Public debt levels were broadly managed to 2024 and 3.5 percent in the medium term, supported ensure sustainability, with most countries maintaining by accommodative fiscal policy, lower interest rates, stable debt-to-GDP ratios. and strong private consumption and investment. The GCC countries have made inroads in Despite diversification efforts, hydrocarbon receipts their ambitious strategies to diversify their econ- will remain crucial in shaping the region’s fiscal pol- omies, which is clearly evident in the divergence icies, external balances, and financial variables. As xiii a result, GCC’s fiscal surplus will continue to narrow High-Income Countries and to help achieve devel- in 2024, reaching 0.1 percent of GDP, while current opment goals (Special Focus Section). While there account surplus is expected to reach 7.5 percent of have been improvements in student learning out- GDP (compared to 8.4 percent of GDP in 2022). comes, the region falls short in meeting international The GCC economic outlook is subject to benchmarks, including in primary and secondary downside risks. Escalating regional conflicts could education, with clear evidence in gender disparities. undermine investor confidence, disrupt trade, and This emphasizes the need for significant investments impede growth. Additionally, a slower-than-expected in quality education to enhance human capital and recovery in China may reduce oil prices and demand, drive sustainable economic development. However, adversely affecting both oil and non-oil sectors. Fiscal progress is hindered by several factors including pref- vulnerabilities remain significant due to oil price vola- erence for credentials over skills, outdated teaching tility and elevated spending, exacerbated by sizeable methods, centralized decision-making, and resistance public sector and state-owned enterprises. The region to modernization. Addressing these issues requires also confronts challenges linked to the climate change, targeted strategies that emphasize foundational skills requiring proactive strategies to mitigate risks and lever- from early childhood, enhance teacher effectiveness, age opportunities within the emerging green economy. and use learning assessments to shape policies. By While the GCC has made notable inroads focusing on improving education quality, GCC coun- in boosting education quality, substantial efforts tries can realize substantial economic benefits and are needed to reach levels attained by other ensure long-term prosperity. xiv GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC Key Take Away Regional Charts: Recent Economic Trends and Outlook The GCC region experienced an economic slowdown in 2023 …meanwhile, non-oil sectors continued robust growth driven by mainly reflecting contraction in oil activities… consumption and investments. 12 12 10 Contribution to growth (percent) 8 8 6 4 4 Percent 2 0 0 –2 –4 –6 –6 –8 2020 2021 2022 2023 2020 2021 2022 2023 Net exports Fixed investment Oil GDP Non-oil GDP RGDP Govt. consumption Private consumption The decline in oil receipts narrowed regional fiscal balance ...and cut the external balance surplus by almost a half. surplus... –24 15 20 –28 10 15 –32 –36 5 10 Percent of GDP –40 0 5 –44 –48 –5 0 –52 –10 –5 –56 –60 –15 –10 2013 2015 2017 2019 2021 2023 2017 2018 2019 2020 2021 2022 2023 Non-oil fiscal balance (lhs) GCC, exports, growth % Fiscal balance (rhs) GCC, current account balance, % GDP Diversification reforms are bearing fruits with non-oil activities …which fosters economic resilience and faster growth ahead. gaining strong momentum... 150 12 140 8 Non-oil RGDP (2013 = 100) 130 4 Percent 120 110 0 100 –4 90 2013 2015 2017 2019 2021 2023 –8 2023 2024 2025 2026 BHR OMN QTR KSA UAE KWT Oil GDP Non-oil GDP RGDP Executive Summary xv ‫موجز تنفيذي‬ ‫ومع توقع استمرار التباطؤ االقتصادي العاملي للعام الثالث عىل‬ ‫التوايل‪ ،‬من املرتقب أن يعتمد اقتصاد دول مجلس التعاون الخليجي يف‬ ‫عام ‪ 2024‬بشكل كبري عىل إنتاج النفط وأسعاره‪ .‬من املتوقع أن ينتعش منو‬ ‫انت منطقة دول مجلس التعاون الخليجي من تباطؤ اقتصادي‬ ‫د ذلك‬ ‫يف عام ‪ ،2023‬حيث سجلت منواً بنسبة ‪ 0.7%‬فقط‪ ،‬ومر ّ‬ ‫يف املقام األول إىل التخفيضات الصارمة يف إنتاج منظمة أوبك ‪.+‬‬ ‫ع‬ ‫الناتج املحيل اإلجاميل اإلقليمي ويبلغ ‪ 2.8%‬يف عام ‪ 2024‬قبل أن تتسارع‬ ‫وقد تفاقم التباطؤ بسبب تشديد الظروف النقدية العاملية والتوترات‬ ‫وترية النمو أكرث ليصل إىل ‪ 4.7%‬يف عام ‪ .2025‬ومع توقع رفع حصص‬ ‫الجيوسياسية املستمرة‪ ،‬مام أضاف مستويات من عدم اليقني إىل املشهد‬ ‫إنتاج النفط تدريجياً خالل النصف الثاين من عام ‪ ،2024‬من املفرتض أن‬ ‫االقتصادي‪ .‬وعىل الرغم من هذه التحديات‪ ،‬فقد اتّسمت القطاعات غري‬ ‫ينمو الناتج املحيل اإلجاميل النفطي بنسبة ‪ 1.7%‬هذا العام قبل أن يحلّق‬ ‫النفطية يف مجمل دول مجلس التعاون الخليجي باملرونة‪ ،‬حيث منت‬ ‫يف عام ‪ 2025‬مسجالً ‪ .6.9%‬ويف الوقت نفسه‪ ،‬من املتوقع أن يظل الناتج‬ ‫ة بإصالحات هيكلية قوية واستثامرات‬ ‫بنسبة ‪ 3.9%‬يف عام ‪ ،2023‬مدعوم ً‬ ‫املحيل اإلجاميل غري النفطي قوياً وينمو بنسبة ‪ 3.6%‬يف عام ‪ 2024‬و‪3.5%‬‬ ‫مستدامة‪ .‬ومتّت إدارة الضغوط التضخمية بفعالية من خالل سياسات‬ ‫عىل املدى املتوسط‪ ،‬مدعوماً بسياسة مالية توسعية‪ ،‬وانخفاض أسعار‬ ‫نقدية يقظة تتامىش مع االتجاهات العاملية‪.‬‬ ‫الفائدة‪ ،‬وقوة االستهالك واالستثامر الخاص‪ .‬وعىل الرغم من جهود التنويع‪،‬‬ ‫تقلصت فوائض امليزان املايل والخارجي بشكل كبري يف عام‬ ‫ستظل عائدات النفط والغاز حاسمة يف تشكيل السياسات املالية للمنطقة‪،‬‬ ‫ة بالعام السابق‪ ،‬الذي يعكس ضعف العائدات النفطية‪ .‬بلغ‬ ‫‪ 2023‬مقارن ً‬ ‫ة لذلك‪ ،‬سيستمر الفائض‬ ‫واألرصدة الخارجية‪ ،‬واملتغريات املالية فيها‪ .‬ونتيج ً‬ ‫الفائض املايل اإلقليمي ‪ 0.5%‬من الناتج املحيل اإلجاميل (انخفاضاً من ‪5.5‬‬ ‫املايل لدول مجلس التعاون الخليجي يف التقلص يف عام ‪ ،2024‬ليبلغ ‪0.1%‬‬ ‫‪ %‬يف عام ‪ ،)2022‬بينام سجل فائض الحساب الجاري ‪ 8.4%‬من الناتج‬ ‫من الناتج املحيل اإلجاميل‪ ،‬فيام يُتوقَّع أن يصل فائض الحساب الجاري إىل‬ ‫املحيل اإلجاميل (من ‪ 15.7%‬يف عام ‪ .)2022‬وواصلت حكومات املنطقة‬ ‫ة بـ ‪ 8.4%‬يف عام ‪.)2022‬‬ ‫‪ 7.5%‬من الناتج املحيل اإلجاميل (مقارن ً‬ ‫جهودها لتنويع اإليرادات غري النفطية من خالل الرضائب والرسوم؛ ومع‬ ‫رضة‬ ‫إن اآلفاق االقتصادية لدول مجلس التعاون الخليجي مع ّ‬ ‫ذلك‪ ،‬ال تزال هذه اإليرادات غري كافية للتعويض عن االنخفاضات املسجلة‬ ‫ملخاطر التطورات املعاكسة‪ .‬ومن املمكن أن يؤدي تصاعد الرصاعات‬ ‫يف العائدات النفطية‪ .‬كام وتم إدارة مستويات الدين العام عىل نطاق‬ ‫اإلقليمية إىل تقويض ثقة املستثمرين‪ ،‬وتعطيل التجارة‪ ،‬وإعاقة النمو‪.‬‬ ‫واسع لضامن االستدامة‪ ،‬وذلك باحتفاظ معظم الدول بنسب مستقرة‬ ‫باإلضافة إىل ذلك‪ ،‬قد يؤدي ضعف التعايف يف الصني إىل انخفاض أسعار‬ ‫للدين العام إىل الناتج املحيل اإلجاميل‪.‬‬ ‫النفط والطلب عليه‪ ،‬مام يؤثر سلباً عىل القطاعني النفطي وغري النفطي‪.‬‬ ‫قطعت دول مجلس التعاون الخليجي شوطاً كبرياً يف‬ ‫مواطن الضعف يف املالية العامة كبرية بسبب تقلب أسعار النفط‬ ‫وال تزال َ‬ ‫اسرتاتيجياتها الطموحة لتنويع اقتصاداتها‪ ،‬وهو ما يتجىل بوضوح يف‬ ‫وزيادة اإلنفاق‪ ،‬وتتفاقم بسبب ضخامة حجم القطاع العام واملؤسسات‬ ‫التباين القائم بني أداء القطاعني النفطي وغري النفطي‪ .‬وأكد هذا التقدم‬ ‫اململوكة للدولة‪ .‬كام تواجه املنطقة تحديات مرتبطة بتغري املناخ‪ ،‬مام‬ ‫فعالية اإلصالحات الهيكلية الجارية التي تعزز االستهالك واالستثامرات‬ ‫يتطلب اسرتاتيجيات استباقية للتخفيف من املخاطر واالستفادة من‬ ‫د التنويع أمرا ً بالغ األهمية للتخفيف من آثار تقلب‬ ‫الخاصة‪ ،‬ويُع ّ‬ ‫الفرص املتاحة يف االقتصاد األخرض الناشئ‪.‬‬ ‫جل تحسناً ملحوظاً يف قطاعات السياحة والطاقة‬ ‫سّ‬ ‫أسعار النفط‪ ،‬حيث ُ‬ ‫ويف حني حققت دول مجلس التعاون الخليجي تقدماً ملحوظاً يف‬ ‫املتجددة والخدمات املالية والتحول الرقمي‪ .‬وقد أدت إصالحات سوق‬ ‫تعزيز جودة التعليم‪ ،‬إال أن هناك حاجة إىل بذل جهود كبرية للوصول إىل‬ ‫العمل املتزامنة التي تهدف إىل تعزيز مشاركة القوى العاملة يف تثبيت‬ ‫املستويات التي حققتها البلدان األخرى ذات الدخل املرتفع وللمساعدة‬ ‫جهود التنويع تلك وتسهيل النمو الشامل واالزدهار االقتصادي‪.‬‬ ‫‪xvii‬‬ ‫الشهادات عىل املهارات‪ ،‬وأساليب التدريس قدمية‪ ،‬ومركزية صنع القرار‪،‬‬ ‫يف تحقيق أهداف التنمية (القسم الخاص من التقرير)‪ .‬فعىل الرغم من‬ ‫ومقاومة التحديث‪ .‬وتتطلب معالجة هذه القضايا اسرتاتيجيات هادفة‬ ‫تحسن نتائج تعلم الطالب‪ ،‬إال أن أداء املنطقة دون املعايري الدولية‪ ،‬مبا يف‬ ‫ّ‬ ‫تركز عىل املهارات األساسية منذ مرحلة الطفولة املبكرة‪ ،‬وتعزز فعالية‬ ‫ذلك التعليم االبتدايئ والثانوي‪ ،‬مع وجود أدلة واضحة تشري اىل فوارق بني‬ ‫املعلِّم‪ ،‬وتستخدم تقييامت التعلم لتصميم سياسات ناجعة‪ .‬ومن خالل‬ ‫الجنسني‪ .‬ويؤكد هذا الواقع الحاجة إىل استثامرات كبرية يف التعليم ذات‬ ‫الرتكيز عىل تحسني جودة التعليم‪ ،‬تستطيع دول مجلس التعاون الخليجي‬ ‫جودة عالية لتعزيز رأس املال البرشي ودفع التنمية االقتصادية املستدامة‬ ‫تحقيق فوائد اقتصادية كبرية وضامن االزدهار عىل املدى الطويل‪.‬‬ ‫إىل األمام‪ .‬ومع ذلك‪ ،‬فإن التقدم يصطدم بعدة عوامل‪ ،‬منها تفضيل‬ ‫‪xviii‬‬ ‫‪GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC‬‬ ‫الرسوم البيانية ألبرز االستنتاجات عىل صعيد منطقة دول مجلس التعاون الخليجي‪ :‬أحدث االتجاهات واآلفاق االقتصادية‬ ‫‪ ...‬ﻓﻴ واﺻﻠﺖ اﻟﻘﻄﺎﻋﺎت ﻏ اﻟﻨﻔﻄﻴﺔ ﻮﻫﺎ اﻟﻘﻮي ﻣﺪﻓﻮﻋ ً‬ ‫ﺔ ﺑﺎﻻﺳﺘﻬﻼك‬ ‫ﺷﻬﺪت ﻣﻨﻄﻘﺔ دول ﻣﺠﻠﺲ اﻟﺘﻌﺎون اﻟﺨﻠﻴﺠﻲ ﺗﺒﺎﻃﺆا ً اﻗﺘﺼﺎدﻳﺎً ﰲ ﻋﺎم ‪،2023‬‬ ‫واﻻﺳﺘﺜ رات‪.‬‬ ‫وﻫﻮ ﻣﺎ ﻳﻌﻜﺲ ﺑﺸﻜﻞ رﺋﻴﴘ اﻧﻜ ش اﻷﻧﺸﻄﺔ اﻟﻨﻔﻄﻴﺔ…‬ ‫‪12‬‬ ‫‪12‬‬ ‫‪10‬‬ ‫‪8‬‬ ‫‪8‬‬ ‫اﳌﺴﺎﻫﻤﺔ ﰲ اﻟﻨﻤﻮ‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ‬ ‫‪6‬‬ ‫‪4‬‬ ‫ﺑﺎﻟﻨﺴﺒﺔ اﳌﺌﻮﻳﺔ‬ ‫‪4‬‬ ‫‪2‬‬ ‫‪0‬‬ ‫‪0‬‬ ‫‪–2‬‬ ‫‪–6‬‬ ‫‪–4‬‬ ‫‪–6‬‬ ‫‪2020‬‬ ‫‪2021‬‬ ‫‪2022‬‬ ‫‪2023‬‬ ‫‪–8‬‬ ‫‪2020‬‬ ‫‪2021‬‬ ‫‪2022‬‬ ‫‪2023‬‬ ‫ﺻﺎﰲ اﻟﺼﺎدرات‬ ‫اﻻﺳﺘﺜ رات اﻟﺜﺎﺑﺘﺔ‬ ‫اﻻﺳﺘﻬﻼك اﻟﻌﺎم‬ ‫اﻻﺳﺘﻬﻼك اﻟﺨﺎص‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ اﻟﻨﻔﻄﻲ‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ ﻏ اﻟﻨﻔﻄﻲ‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ اﻹﻗﻠﻴﻤﻲ‬ ‫‪ ...‬وﺧﻔﺾ ﻓﺎﺋﺾ اﳌﻴﺰان اﻟﺨﺎرﺟﻲ ﻘﺪار اﻟﻨﺼﻒ ﺗﻘﺮﻳﺒﺎً‬ ‫أدى ﺗﺮاﺟﻊ ﻋﺎﺋﺪات اﻟﻨﻔﻂ إﱃ ﺗﻀﻴﻴﻖ ﻓﺎﺋﺾ اﳌﻴﺰان اﳌﺎﱄ اﻹﻗﻠﻴﻤﻲ‪...‬‬ ‫‪20‬‬ ‫‪–24‬‬ ‫‪15‬‬ ‫‪–28‬‬ ‫‪15‬‬ ‫‪10‬‬ ‫ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ ﻣﻦ اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ‬ ‫‪–32‬‬ ‫‪10‬‬ ‫‪–36‬‬ ‫‪5‬‬ ‫‪–40‬‬ ‫‪5‬‬ ‫‪0‬‬ ‫‪–44‬‬ ‫‪0‬‬ ‫‪–48‬‬ ‫‪–5‬‬ ‫‪–52‬‬ ‫‪–5‬‬ ‫‪–10‬‬ ‫‪–56‬‬ ‫‪–10‬‬ ‫‪–60‬‬ ‫‪–15‬‬ ‫‪2017‬‬ ‫‪2018‬‬ ‫‪2019‬‬ ‫‪2020‬‬ ‫‪2021‬‬ ‫‪2022‬‬ ‫‪2023‬‬ ‫‪2013‬‬ ‫‪2015‬‬ ‫‪2017‬‬ ‫‪2019‬‬ ‫‪2021‬‬ ‫‪2023‬‬ ‫ﻧﺴﺒﺔ ﻮ اﻟﺼﺎدرات‬ ‫رﺻﻴﺪ اﳌﺎﻟﻴﺔ اﻟﻌﺎﻣﺔ ﻏ اﻟﻨﻔﻄﻲ )ﻳﺴﺎر(‬ ‫رﺻﻴﺪ اﻟﺤﺴﺎب اﻟﺠﺎري‪ ،‬ﻧﺴﺒﺔ ﻣﺌﻮﻳﺔ ﻣﻦ اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ‬ ‫رﺻﻴﺪ اﳌﺎﻟﻴﺔ اﻟﻌﺎﻣﺔ ) (‬ ‫ﺎرﻫﺎ ﻣﻊ اﻛﺘﺴﺎب اﻷﻧﺸﻄﺔ ﻏ‬ ‫ﻳﺒﺪو أن إﺻﻼﺣﺎت اﻟﺘﻨﻮﻳﻊ ﺗﺆ‬ ‫… ﻣ ﻳﻌﺰز اﳌﺮوﻧﺔ اﻻﻗﺘﺼﺎدﻳﺔ وﻳ ّ‬ ‫ﴪع وﺗ ة اﻟﻨﻤﻮ ﰲ اﳌﺴﺘﻘﺒﻞ‪.‬‬ ‫اﻟﻨﻔﻄﻴﺔ زﺧ ً ﻗﻮﻳﺎً‪...‬‬ ‫‪12‬‬ ‫‪150‬‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ اﻟﻔﻌﲇ ﻏ اﻟﻨﻔﻄﻲ‪100 = 2013 ،‬‬ ‫‪8‬‬ ‫‪140‬‬ ‫‪130‬‬ ‫‪4‬‬ ‫ﺑﺎﻟﻨﺴﺒﺔ اﳌﺌﻮﻳﺔ‬ ‫‪120‬‬ ‫‪0‬‬ ‫‪110‬‬ ‫‪–4‬‬ ‫‪100‬‬ ‫‪–8‬‬ ‫‪90‬‬ ‫‪2023‬‬ ‫‪2024‬‬ ‫‪2025‬‬ ‫‪2026‬‬ ‫‪2013‬‬ ‫‪2015‬‬ ‫‪2017‬‬ ‫‪2019‬‬ ‫‪2021‬‬ ‫‪2023‬‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ اﻟﻨﻔﻄﻲ‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ ﻏ اﻟﻨﻔﻄﻲ‬ ‫اﻟﺒﺤﺮﻳﻦ‬ ‫ﻋ ن‬‫ُ‬ ‫ﻗﻄﺮ‬ ‫اﻟﻨﺎﺗﺞ اﳌﺤﲇ اﻹﺟ ﱄ اﻟﻔﻌﲇ‬ ‫اﳌﻤﻠﻜﺔ اﻟﻌﺮﺑﻴﺔ اﻟﺴﻌﻮدﻳﺔ‬ ‫اﻹﻣﺎرات اﻟﻌﺮﺑﻴﺔ اﳌﺘﺤﺪة‬ ‫اﻟﻜﻮﻳﺖ‬ ‫موجز تنفيذي‬ ‫‪xix‬‬ 1 RECENT DEVELOPMENTS Regional GDP lost steam in 2023 primarily due GCC countries during the past decades have notably to OPEC+ tighter production quotas, yet non- enhanced non-oil economic performance and diversi- oil sectors sustained momentum reflecting a fication efforts, boosting overall private consumption continuation of diversification efforts. and investments (Figure 2) and contributing to overall economic resilience. The GCC region experienced an economic slow- The OPEC+ strategic and consecutive deci- down in 2023, growing at annual rate of 0.7 per- sions to cut oil production to stabilize global cent, after registering stellar growth of 7.6 percent in prices are impacting GCC regional economic 2022. While the growth in the previous year was sup- performance in the short term. During 2023, sev- ported by a boom in commodity prices, increased eral OPEC+ decisions were made to stabilize global oil production, and strong non-hydrocarbon activ- oil prices and adjust to fluctuating demand (Box 1). ities (Figure 1) the deceleration in 2023 was pri- However, despite these efforts, oil average prices marily due to oil production cuts, contracting by dropped from US$100 per barrel in 2022 to US$83 5 percent, in line with tighter OPEC+ quotas to sta- in 2023, leading to lower oil receipts. Given the bilize oil prices. This was further exacerbated by still substantial hydrocarbon sector, this negatively tightening global monetary conditions and geopolit- affected short-term regional economic performance. ical developments, namely the conflict in the Middle Assessing oil prices developments in a scenario East and ramifications of disruptions in the Red Sea where production cuts had not been implemented is shipping routes. a challenging task. However, with peak oil demand The decline in oil sector activities in the approaching, concerns by many OPEC+ members GCC economies was partially counterbalanced are mounting from leaving substantial oil reserves by a sustained robust non-oil sectors momen- stranded. This underscores the increasingly difficult tum, with non-oil GDP growth reaching 3.9 per- position GCC countries are facing in balancing supply cent in 2023. Structural reforms undertaken by limitations to stabilize oil prices, and financing their 1 Slowdown in GCC regional economic FIGURE 1 •  …while non-oil sectors continued FIGURE 2 •  activity during 2023 primarily due to strong performance supported by a contraction in oil activities… private and government consumption and investments. 12 12 8 9 Contribution to growth (percent) 6 4 Percent 3 0 0 –4 –3 –6 –8 2020 2021 2022 2023 2020 2021 2022 2023 Net exports Fixed investment Oil GDP Non-oil GDP RGDP Govt. consumption Private consumption Source: Haver and World Bank staff calculations. Source: Haver Analytics and World Bank staff calculations. ambitious reform agendas, e.g. Vision 2030 of Saudi Non-oil sectors continued exhibiting sus- Arabia. tained resilience and significant improvements There is clear divergence in individual during 2023, highlighting the effectiveness of country economic performance during 2023 diversification strategies and structural reforms (Figure 3). The good performers, the UAE and in the GCC region (Box 2). In 2023, non-oil sec- Bahrain, have seen their growth accelerating to tors in the GCC showed strong growth momentum, 3.1 and 2.6 percent respectively, supported by strong supported by sustained private consumption, strate- performances in the non-oil sector, such as tour- gic investments, and ongoing economic reforms. This ism and construction. Additionally, the UAE saw an resilience is highlighted by an estimated 3.9 percent increased migration and capital inflows from Russia, growth in 2023. High-frequency data also reports a thereby boosting the real estate sector and supporting strong start of non-oil sectors during Q1-2024 sup- the overall economic activity. Meanwhile, Qatar and ported by PMI data comfortably situated at expan- Oman experienced modest growth of 1.8 and 1.4 per- sion territory (Figure. 4). Continued efforts to promote cent, respectively. While Qatar managed to maintain fiscal discipline, strengthen the financial sector, and a modest growth through infrastructure spending and enhance labor force inclusivity, particularly through tourism activities, Oman’s slowdown in growth was increased female participation, are essential for sus- triggered by oil output cuts, despite its efforts to boost taining growth and advancing economic diversifi- the economy through the Oman Future Fund initia- cation in the face of potential global and regional tive and renewable energy investments.1 The weakest challenges. growth performance was observed in Saudi Arabia In addition to the risks associated to and Kuwait, with a 0.9 and 0.1 percent contraction fluctuations in oil prices and production, the respectively, affected by voluntary oil output cuts. Saudi Arabia’s economic contraction is the worst 1 https://www.iea.org/news/oman-s-huge-renewable- in two decades excluding crisis years,2 as the strong hydrogen-potential-can-bring-multiple-benefits-in-its- momentum in non-oil activities could not fully offset journey-to-net-zero-emissions. the oil sector’s decline. 2 The pandemic and global financial crises years. 2 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC BOX 1. OPEC+ DECISIONS AND IMPLICATIONS ON GCC ECONOMIES As part of the OPEC+ alliance, GCC countries implemented 20,000 100 significant oil production cuts throughout 2023. These decisions PEC+cut Conflict in the decision Middle East included three rounds of deep cuts in April 2023, June 2023, and 95 November 2023, alongside the extension of additional voluntary 19,500 cuts, announced in March 2024 by KSA (1 million barrels per 90 Crude Oil Price index, 2016=100 day), UAE (163 thousand barrels per day), Kuwait (135 thousand barrels per day), and Oman (42 thousand barrels per day) until 19,000 85 Crude Oil (mb/d) end-Q2-2024. However, despite these measures, intended to stabilize global oil prices and adjust to fluctuating demand, the average price per barrel declined from US$100 in 2022 18,500 80 to US$83 in 2023, due to weaker global demand and broader economic uncertainties. 75 18,000 In early October 2023, the outbreak of the conflict in the Middle 70 East introduced new uncertainties and volatilities to the energy markets. Despite an initial uptick in oil prices, energy markets 17,500 65 have quickly stabilized. The recent escalation of regional tensions due to drone attacks by Iran on Israel also led to short-lived higher prices, with price levels quickly reverting to below those 17,000 60 Jan-23 Apr-23 Jul-23 Oct-23 observed prior to the attack. Also impacted by the conflict in the Middle East on oil prices are disruptions in the Red Sea shipping Crude Oil production (Mb/d) routes. These also further complicate regional trade and overall Crude Oil Price index (rhs) confidence. These dynamics underscore the acute sensitivity of global energy prices to regional geopolitical instability, where Source: U.S. Energy hlfonnation Administration and World Bank staff calculations. anticipated disruptions in supply chains can precipitate immediate Notes: Sum of GCC countries. fluctuations in prices. Higher energy prices, for example, would complicate the return to inflation targets in advanced economies if sustained energy prices start to feed into core inflation. The production cuts have also led GCC countries, particularly Saudi Arabia, to lose market share to other oil exporters such as the United States and Angola (the latter having left OPEC over quota disputes). Furthermore, in the realm of foreign and financial reserves, the GCC countries have had to navigate these turbulent times with strategic financial management to maintain macroeconomic stability and fiscal sustainability to support their currencies and meet international obligations. The cumulative effect of sustained low oil prices, coupled with reduced production levels, has had a substantial impact on the fiscal and external positions of GCC countries. These challenges are compounded by broader global economic conditions and the shifting dynamics of oil demand and supply. GCC—like many other countries—are increas- Inflationary pressures across the region ingly vulnerable to climate change and severe moderated in 2023 after a pickup in 2022, weather-related disasters. In April 2024, the UAE driven by a strong US dollar, a decrease in import and Oman faced unprecedented flooding that prices, and continuation of generous subsidy caused major disruptions including the suspension policies. of hundreds of flights at Dubai International Airport. Accordingly, the UAE has launched a comprehen- Despite robust performance of non-oil sectors, sive review of the resilience of its infrastructure sys- regional inflation rate remained lower than many tems. Recovery prospects appear robust in both regional peers, falling from 3.6 percent in 2022 countries; however, enhanced investment in climate to 2.6 percent in 2023 (Figure 5). Subsidies and adaptation is essential to mitigate future economic administered prices have effectively contained inflation and humanitarian risks. by limiting the impact of international commodity price Recent Developments 3 Clear divergence in individual FIGURE 3 •  …while PMI survey comfortably FIGURE 4 •  country performance during 2023… indicating expansion during Q1-2024. 6 70 4 65 PMI: Total Economy Output (Index) 2023 RGDP growth (percent) 2 60 0 –2 55 Above 50 = expansion; –4 50 Below 50 = contraction –6 45 –8 40 –10 23:M1 23:M5 23:M9 24:M1 UAE BHR QTROMN KWT KSA QTR KSA UAE Oil GDP Non-oil GDP RGDP Source: S&P Global Purchasing Managers Survey. Source: World Bank staff estimations. Note: Data for UAE, OMN, BHR is not available. Regional inflation remained lower FIGURE 5 •  GCC central banks raised rates FIGURE 6 •  than many regional peers… following the Federal Reserve's monetary tightening. 20 8 15 CB Policy Rate (eop, percent) CPI (y/y percent change) 6 10 4 5 2 0 0 GCC AE USA EU MENA 21:Q3 22:Q1 22:Q3 23:Q1 23:Q3 24:Q1 2022 2023 BHR QTR KSA UAE OMN KWT USA Source: Source: IMF WEO April 2024; WB MPO, SM 2024; and WB staff calculations. Note: MENA include Middle East, North Africa, Afghanistan, and Pakistan. Source: Haver and World Bank staff calculations. shocks on businesses and consumers. Furthermore, Additional policy measures were sus- and following the Federal Reserve’s monetary tight- tained by the GCC countries to effectively man- ening and to preserve their pegged exchange rates, age inflation. Kuwait and Oman reduced inflation the GCC central banks continued in 2023 with upward to 3.6 percent and 0.9 percent, respectively, sup- adjustments in their key policy rates (Figure 6). As a ported by monetary policy adjustments and continua- result, inflationary pressures were largely contained, tion of generous subsidies on food and energy. In the bolstered by the implementation of stringent monetary UAE, inflation fell to 3.2 percent, as lower food prices policies that closely mirror global trends. have offset the impact of rising housing costs, with 4 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC public wage growth remaining moderate through- well as a decrease in government revenue from dimin- out the year. Qatar maintained a low inflation rate of ished tax and non-tax receipts. However, both coun- 3.1 percent, benefiting from lower commodity prices tries continued their strategic expenditure growth, and a strong Qatari riyal, reflecting the peg to the supporting development initiatives,4 highlighting a US dollar. Bahrain achieved a significant reduction in commitment to sustainable, green, and digital growth. inflation, to 0.1 percent, mainly driven by fading base Meanwhile, in Oman, expenditures decreased signif- effects (the high base in 2022 reflects doubling of icantly to reflect lower debt service costs and real- VAT rate from 5 to 10 percent), lower global commod- location of transportation expense items from the ity prices and transportation costs. general budget. However, fiscal revenues contracted The banking system among the GCC coun- by a higher amount in nominal terms, primarily due to tries remain robust, well-capitalized, and liquid, reduced hydrocarbon revenues. This led to narrowing benefiting from the region’s economic resilience of the fiscal surplus to 5.6 percent of GDP in 2023, and sound macroeconomic policies. The banking down from 10.1 percent of GDP in the previous year. system among the GCC countries continues to be In Kuwait, the combination of declining (primarily oil) strong and maintain robust capital adequacy ratios revenues and rising expenditures (especially salaries, and liquidity buffers. These factors underscore the grants, and subsidies) led to a fiscal deficit of 6.8 per- sector’s capacity to withstand potential vulnerabilities cent of GDP (against a surplus of 2.2 percent of GDP from external economic pressures. Despite geo-eco- in 2022). Qatar maintained a sizable fiscal surplus of nomic challenges and market volatilities, GCC banks 6.1 percent of GDP, albeit declining, from a relatively have continued to show strong fundamentals, includ- stable gas revenue supported by long-term contracts. ing maintaining high profitability, which underline Similarly, Bahrain maintains its fiscal consolidation their stability and ability to manage risks effectively. track, helped by contained spending and increased Monetary authorities continue to enhance banking revenue notably from VAT (following the doubling oversight by strengthening regulatory frameworks of its rate to 10 percent in 2022), showing a strong and improving compliance with Financial Action Task commitment to its ongoing multi-year Fiscal Balance Force standards. Program.5 Regional debt levels stayed broadly sta- Lower oil receipts and sustained public spending ble during 2023 for most GCC countries. Overall, plans significantly affected countries’ fiscal public debt-to-GDP ratios in all GCC countries con- balances during 2023, but debt levels remained tinue their declining trend after the pandemic-induced broadly stable. surge, supported by robust economic recovery and improved fiscal positions from high oil prices notably The reduction in oil revenues combined with in 2022. In 2023, the debt-to-GDP ratios stayed at their expansionary fiscal policies eroded the fiscal sur- 2022 levels, with the exceptions of Saudi Arabia, plus across the region. The regional fiscal surplus narrowed from 5.5 percent of GDP in 2022 to 0.5 per- 3 Different GCC countries levied different fees, mostly cent of GDP in 2023. Meanwhile, the non-oil fiscal bal- concentrated in travel and tourism, municipalities, and ance continued to improve (Figure 7), bolstered by business sectors. developments in non-oil sectors and the introduction 4 Including the UAE Energy Strategy 2050, the UAE Tourism of taxes, e.g. VAT and excises, and fees3 by many GCC Strategy 2031, the UAE Digital Government Strategy 2025, countries. In Saudi Arabia, lower oil revenues cou- and the Dubai Autonomous Transportation Strategy. For pled with expansionary fiscal policy resulted in a fiscal Saudi Arabia, these include Vision 2030 and financing of giga projects. deficit of 2.1 percent of GDP, compared to a surplus of 5 Official fiscal data for Bahrein in 2023 have not been 2.6 percent of GDP in the previous year. Similarly, the released yet; the fiscal balance is estimated to have UAE experienced a halving of its fiscal surplus to 5.6 remained in surplus at 2.6 percent in 2023, albeit lower percent of GDP due to decreased oil production as than the 4.9 percent registered in 2022. Recent Developments 5 Regional fiscal surplus narrowed FIGURE 7 •  …with debt levels broadly staying FIGURE 8 •  while non-oil fiscal balance continued stable and below MENA average in to improve supported by non-oil most GCC countries. sector activities… 80 150 –24 15 Total GG debt (percent of GDP) Total GG debt (percent of GDP) 10 –32 60 100 5 Percent of GDP –40 0 –48 –5 20 50 –56 –10 –64 –15 0 0 2013 2015 2017 2019 2021 2023 2013 2015 2017 2019 2021 2023 Non-oil fiscal balance (lhs) MENA QTR KSA UAE Fiscal balance (rhs) KWT OMN BHR (rhs) Source: IMF, WB databases and World Bank staff calculations. Source: IMF, WB databases and World Bank staff calculations. Oman, and Bahrain, where they rose by 1, 2.6, and account surplus more than essentially halved from 7.1 percent of GDP, respectively (Figure 8). In Saudi lower oil exports, down to an estimated 6.7 percent Arabia, financing needs were addressed through of GDP in 2023, from 15.4 percent in the previous the issuance of a US$10 billion sovereign bond while year. Contrasting with the region’s trends however, state oil firm Aramco introduced a performance- the UAE maintained a robust current account sur- linked dividend, supplementing its annual base div- plus of 9.1 percent of GDP (albeit lower from the idend, to bolster budgetary funds. Furthermore, the 11.7 percent registered in the previous year), sup- country made its largest international debt issuance ported by rising non-oil exports in tourism and trade since 2017 (US$12 billion) in January 2024, to par- service, from enhanced new trade agreements with tially cover the anticipated financing gap. key Asian and African markets. International reserves remained at com- Similarly, regional external accounts surplus fortable levels, increasing the resiliency of the shrunk in 2023 reflecting lower oil receipts. region to shocks and the associated volatil- ity in economic activity (Figure 10). The substan- Reflecting lower oil exports and prices, the com- tial improvement over the past decade in the GCC’s bined current account balance of GCC countries external balances, primarily driven by the hydrocar- declined to 8.4 percent of GDP in 2023, com- bon sector and complemented by the expansion in pared to the large surplus of 15.7 percent regis- non-oil exports in several countries, has kept financial tered in 2022 (Figure 9). Saudi Arabia’s current reserves at comfortable levels. These reserves con- account surplus narrowed significantly to 4 percent tinue to be robust across most countries in 2023, with of GDP in 2023, down from 13.7 percent the pre- UAE registering significant growth throughout the vious year, due to a steep decline in oil receipts. year. Meanwhile, Saudi Arabia and Kuwait witnessed Oman also observed a contraction in trade activ- a decline in reserves affected by the fall in oil exports. ity, with its current account surplus narrowing to 2.8 The accumulation of foreign reserves enhances exter- percent of GDP from 5 percent, due to a decline nal stability and serves as an important buffer against in hydrocarbon revenues. Bahrain saw its current global financial volatility. 6 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC Regional current account surplus FIGURE 9 •  …meanwhile, international reserves FIGURE 10 •  narrowed in 2023 with declining oil remain at elevated levels and receipts… provide resiliency against shocks. 20 150 International Reserves (January 2013 = 100) 15 140 130 10 120 5 110 0 100 –5 90 –10 80 2017 2018 2019 2020 2021 2022 2023 Jan-23 May-23 Sep-23 Jan-24 GCC, exports, growth % GCC, current account balance, % GDP KWT OMN QTR UAE KSA Source: World Bank MPO database. Source: Haver and World Bank staff calculations. Efforts to address labor markets challenges in overall positive labor market outcomes, with sta- the region—notably youth unemployment and ble unemployment at 5.1 percent amid a slight rise gender disparities—remain essential to reap the among Saudi women—building on the remarkable benefits of diversification efforts. increases since 2017—potentially due to labor sup- ply growth outpacing demand. However, the over- Positive advancements in diversification efforts all labor force participation rate slightly declined to and the development of non-oil sectors are pro- 51.6 percent, with decreases primarily among Saudi gressing in the GCC countries, albeit with varying males and non-Saudi women. The UAE experienced levels of commitment and implementation across a rebound in employment to pre-pandemic levels, the region over the past decade (Figure 11). The with an estimated labor force participation rate of majority of GCC countries are strengthening their eco- 82.7 percent, yet unemployment rates remained sub- nomic resilience by enacting strategic policy reforms stantially higher among young adults, particularly and boosting investments in key sectors including women. Kuwait continued its post-pandemic recov- tourism, financial services, and technology. For exam- ery, with unemployment rates estimated to remain rel- ple, Saudi Arabia recently launched innovative com- atively steady in 2023 at 0.9 percent among men and panies in NEOM for sustainable food production 5.7 percent among women, albeit still higher than the (Topian) and for arts and entertainment (Utamo) while 2019 rates. Meanwhile, Oman witnessed improve- UAE approved a US$10 billion investment in tourism ments in labor force participation with job seeker rate infrastructure and initiated a substantial US$10.9 bil- among women aged 25–29 decreasing by 6.7 per- lion public-private partnership portfolio—see Box 2 for centage points from the previous year, and a slight more details. 0.3 percentage point increase among men in the During the past decade, labor market same age group by the end of 2023. Qatar’s labor dynamics among GCC countries showed varying market indicators remained stable, with an estimated trends, reflecting overall diversification trends labor force participation rate of 88.9 percent and an but also country-specific socioeconomic factors unemployment rate of 0.1 percent. Efforts to address (Figure 12). In 2023, Saudi Arabia demonstrated challenges, such as youth unemployment and Recent Developments 7 Diversification and non-oil sector FIGURE 11 •  …significantly impacting labor FIGURE 12 •  development are advancing in most market dynamics and female GCC countries… employment opportunities. 150 140 140 130 Employment-to-population ratio, Non-oil RGDP (2013 = 100) female 25+ (2013 = 100) 130 120 120 110 110 100 100 90 90 80 2013 2015 2017 2019 2021 2023 2013 2015 2017 2019 2021 2023 BHR OMN QTR UAE BHR KWT KSA UAE KWT OMN QTR KSA Source: Haver and WB staff calculations. Source: ILO and WB staff calculations. gender disparities within the region remain essen- market reforms. These initiatives have fostered more tial, underscoring the ongoing commitment to foster- competitive markets and strengthened the private ing inclusive growth and sustainable development. sector, stimulating foreign investment and job cre- For example, Saudi Arabia established reforms ded- ation across various sectors. Additionally, effective icated to the promotion of women’s engagement in implementation continues to mitigate the region’s economic development by preventing gender dis- exposure to global oil price fluctuations by strength- crimination while UAE made amendments to the ening the non-oil sector and diversifying government labor law to enhance transparency, fairness, and flex- revenue sources. Improvements in the non-oil fiscal ibility in the workplace. stance have broadened the revenue base, improved Overall, structural reforms in the GCC fiscal positions through new public revenue sources, region have progressed and are reflecting posi- and reduced reliance on oil receipts. Against this tively on economic performance across the mem- background, the Gulf Economic Update monitors ber states. These reforms include notably a large structural reforms implemented in recent quarters investment in economic infrastructure, the enhance- and tracks continued diversification efforts. This edi- ment of international trade and cooperation, finan- tion highlights reforms that were enacted during cial sector development, and employment and labor Q4-2023 and Q1-2024, as detailed in Box 2. 8 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC BOX 2. TRACKING RECENT STRUCTURAL REFORMS (FOCUSING ON Q4 2023 AND Q1 2024) Saudi Arabia. KSA intensified its economic transformation with strategic initiatives led by the Public Investment Fund (PIF) and other key agencies. The PIF launched Dan Company for agritourism which aims at contributing to the development of the tourism sector. Key domestic projects include the expansion of electronic visa services and the launch of innovative companies in NEOM, such as Topian for sustainable food production and Utamo for arts and entertainment. These efforts are complemented by significant investments, including a US$6.4 billion petrochemical complex in China, and national Saudization programs to increase local employment in strategic sectors, all aligning with Saudi Arabia’s Vision 2030 objectives. UAE. The UAE is actively pursuing a series of structural reforms and strategic investments to diversify its economy and enhance industrial capabilities. Major initiatives include Abu Dhabi’s US$10 billion investment in tourism infrastructure, and ADNOC Gas’s US$13 billion plan for global and domestic expansion over the next five years. In Dubai, a substantial US$10.9 billion public-private partnership portfolio was approved, and a 20 percent tax was imposed on the annual taxable income of foreign banks operating in the emirate, except for those licensed in the Dubai International Financial Centre. Additionally, the UAE’s Emiratization strategy is bolstered by a new US$1.74 billion budget aiming to integrate 36,000 citizens into the private sector by 2024. Qatar. Qatar is advancing structural reforms to diversify and strengthen its economy. The Qatar Investment Authority has announced the creation of a US$1 billion venture capital-focused fund to bolster local and regional startups. Additionally, Qatar is set to expand its North Field, aiming to increase liquefied natural gas production from 77 million metric tons per year to 142 million metric tons by the end of 2030, enhancing its global energy standing. Kuwait. While reform progress in Kuwait has been limited, the government approved US$614 million for the development of Mubarak Al-Kabeer Port on Bubiyan Island to improve maritime infrastructure. Additionally, the Central Bank of Kuwait has issued US$792 million in 3-month bonds and Tawarruq, an Islamic financing instrument, intended to strengthen financial market’s liquidity. Oman. Oman is implementing structural reforms to enhance its economic infrastructure and attract global investments. The Oman Investment Authority has launched Future Fund Oman, a US$5.2 billion initiative, aimed at supporting local SMEs and drawing foreign investment. Bahrain. During this period, no significant structural reforms were observed. Source: The Arab Gulf States Institute in Washington. Recent Developments 9 2 OUTLOOK AND RISKS In a context of expected slower global growth Following a modest growth of 1.9 percent in 2023, in 2024 for the third consecutive year, oil prices the MENA region is projected to grow by 2.7 percent will continue to play an integral part in defining in 2024,7 (Figure 13). In 2022, the surge in oil prices the growth prospects for the GCC region. that followed the beginning of the war in Ukraine had provided a boost to oil-exporting economies, while Marking the third consecutive year of a slow- economic growth in the rest of the world—including down, the global economic activity is expected to MENA oil importers—had slowed down. The divergent continue weakening due to tight monetary poli- growth patterns of oil exporters and oil importers, cies, restrictive financial conditions, and sluggish referred to as “The tale of two MENAs,” however saw global trade growth. After a significant deceleration its end in 2023 and is not expected to return in the in 2022, global growth is expected to slow to 2.4 per- coming years. In 2025, the MENA region is expected cent in 2024,6 as the world economy continues to to grow at 4.2 percent,8 but the entire region remains grapple with the lingering effects of the overlapping at risk from the ongoing conflict in the Middle East, shocks of the past four years (the COVID-19 pan- along with adverse spillovers from additional mon- demic, the war in Ukraine, and the increase in infla- etary policy tightening in advanced economies and tion leading to a sharp tightening of global monetary tighter financial conditions. conditions). Furthermore, the eruption of the conflict Despite ongoing production cuts, average in the Middle East is significantly raising geopolitical oil prices for 2024 are expected to remain flat risks and creating large uncertainty in commodity and compared to 2023, with a further decline antici- services markets, with potential adverse implications pated in 2025 (Figure 14). Despite the cautious oil for global growth. In MENA, growth in 2024 is expected 6 World Bank, Global Economic Prospects, Jan 2024. to recover to its pre-pandemic levels, with oil 7 World Bank, MENA Economics Update, April 2024. exporters and importers growing at similar rates. 8 World Bank, MENA Economics Update, April 2024. 11 MENA’s growth is expected to return FIGURE 13 •  …while oil prices moderate to FIGURE 14 •  in 2024 to its pre-pandemic growth reflect uncertainties surrounding oil level… markets. 6 82 5 80 Growth rate (percent) USD per barrel 4 78 3 76 2 74 1 72 2023 2024 2025 2023 2024 2025 2026 World MENA Average spot crude oil Source: Global Economic Prospects, Jan 2024; MENA Economics Update, April 2024. Source: Commodity Market Outlook, Mar 2024. production levels implemented by OPEC+ members, Given the persisting high oil dependence, oil prices are expected to remain nearly unchanged oil prices play an integral part in defining the in 2024 (at US$80 per barrel) and further decline to regional prospects. The 2022 oil price spikes pro- US$76 per barrel in 2025. Weaker global demand, pelled GCC economies to become among the fast- influenced by factors such as softer growth in China, est growing in the world, with regional GDP growth is expected to exert downward pressure on global reaching 7.6 percent. However, as oil revenues remain oil prices, potentially offsetting the effect of the sup- a primary driver of economic activity, oil price shocks ply reduction announced by OPEC+. However, sev- can affect GCC’s economic activities through vari- eral factors present large uncertainties to energy ous channels, including fiscal position and external market outlook, notably the geopolitical tensions accounts balances. Oil price volatility can also affect recently exacerbated by the military attacks between investor confidence, influencing foreign direct invest- Iran and Israel and the ongoing disruptions of com- ment decisions and portfolio investment flows. It is mercial shipping routes in the Red Sea. Any further estimated that a 10 percent negative/positive shock escalation in regional conflicts could disrupt energy on oil price will reduce/increase regional GDP growth supplies, leading to a spike in energy prices. Other by 0.6 percentage point, fiscal balance by 1.8 per- factors of uncertainty include the recent strikes on cent of GDP, and current account balance by 1.5 per- Russian energy infrastructure, the degree of com- cent of GDP. The GCC countries have recognized the pliance by OPEC+ countries to production quotas, importance of diversifying their economies away from and the prospects of global economic growth and oil and have taken significant steps in this direction, the ensuing volatility in world oil consumption and yet these risks highlight the need to sustain and even demand. Weaker-than-projected growth in China accelerate the pace of reforms. could cause a sharper than expected deceleration Furthermore, the global economic out- in global economic activity. Finally, the occurrence of look continues to be clouded by uncertainty and frequent and more severe natural disasters reflecting subject to various risks. The conflict in the Middle climate change effects could worsen, as witnessed East and repercussions of an expansion of this con- in several GCC countries most recently in Oman and flict has sharply heightened geopolitical risks. Attacks in the UAE. on ships in the Red Sea are disrupting shipping 12 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC GDP growth rebounds from 2023 but FIGURE 15 •  …driven primarily by private FIGURE 16 •  remains soft, with faster growth consumption, investments, and anticipated ahead… looser fiscal policy. 12 7 5 Contribution to growth (percent) 8 3 4 Percent 1 0 –1 –4 –3 –5 –8 2023 2024 2025 2026 2023 2024 2025 2026 Net exports Fixed investment Oil GDP Non-oil GDP RGDP Govt. consumption Private consumption Source: World Bank staff calculations. Source: World Bank staff calculations. routes, tightening supply chains, and raising the GDP remains robust and continues to expand by risk of inflation. Escalating conflicts could disrupt 3.6 percent in 2024 and 3.5 percent in the medium energy supplies, leading to a spike in energy prices. term. The strong reform momentum has allowed sev- Weaker-than-projected growth in China could cause a eral GCC countries to continue diversifying their non- sharper deceleration in global economic activity than oil sectors. Loose fiscal policy, lower interest rates, expected. Furthermore, climate change effects could strong private consumption, and investment will con- worsen, leading to more frequent and severe natural tinue to support non-oil activities in the medium term disasters, like the floods recently witnessed in Oman (Figure 16). and the UAE. All GCC countries are expected to expe- rience improved growth prospects in 2024 Following the weak performance in 2023, the (Figure 17). Following the contraction witnessed in GCC region is projected to moderately rebound 2023, Saudi Arabia’s real GDP is expected to grow in 2024. by 2.5 percent in 2024, driven primarily by robust non- oil private activities (forecast to grow by 5 percent) The GCC regional GDP growth is expected to which will partially offset the expected 0.8 contraction reach 2.8 percent in 2024, notably impacted by in oil GDP triggered by the extension of voluntary oil expected weak oil sector growth performance production cuts until the end of Q2-2024. This con- in the first half of the year. As Saudi Arabia, UAE, traction is expected to be reversed in 2025 with the Kuwait, and Oman agreed to extend the recent reversal in oil production trends, with oil GDP growth OPEC+ voluntary output cuts until the end of June expected to pick up to 9.6 percent. Meanwhile, in the 2024 to support oil prices, oil GDP is expected UAE, non-oil output is expected to remain robust, to grow at a modest rate of 1.7 percent in 2024. expanding at 3.2 percent, driven by strong perfor- However, these trends are expected to reverse in mance in the tourism, real estate, construction, trans- 2025, with oil output anticipated to ramp up aggres- portation, and manufacturing sectors. Coupled with sively, resulting in a 6.9 percent growth in oil GDP the announcement by OPEC+ of a significant oil pro- in 2025 and leading to an overall GDP growth of duction hike in the second half of 2024 and a recov- 4.7 percent (Figure 15). On the other hand, non-oil ery in global economic activity, the UAE is poised to Outlook and Risks 13 All GCC countries are projected to register a rebound in GDP growth rates supported FIGURE 17 •  primarily by non-oil sectors… 15 10 Growth (percent) 5 0 –5 –10 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2024 2024 2024 2024 2024 2024 2025 2026 2025 2026 2025 2026 2025 2026 2025 2026 2025 2026 Saudi Arabia United Arab Emirates Kuwait Qatar Oman Bahrain Oil GDP Non-oil GDP RGDP Source: World Bank staff calculations. be the top-performing economy in the Gulf this year, 2025–26, reflecting tighter monetary policy, generous with GDP growth reaching 3.9 percent. Economic subsidies, and the stabilizing effect of the currency growth is expected to recover to 2.8 percent in 2024 peg to the U.S. dollar (Figure 18). Weaker imported in Kuwait, driven by expansionary fiscal policies, inflation from main trading partners, mainly driven increased oil production and output from the Al Zour by China, along with the appreciation of the nomi- refinery. The non-oil sector is forecasted to grow by nal effective exchange rate, will contribute to sub- 2.1 percent, but relatively high interest rates may curb dued regional inflation. According to IMF analysis domestic consumption, hindering the economy from using a GVAR model, about 80 percent of historical reaching its full potential. Despite the positive antic- inflation dynamics in the region can be explained by ipation for a strong reforms’ momentum, uncertain- external factors such as imported inflation from trad- ties associated with the ongoing political transition ing partners and the nominal effective exchange rate.9 risk delaying the implementation of new infrastructure Tightening of global monetary policy has impacted projects and slowing down reform initiatives. Growth domestic financial conditions and credit growth in should improve in 2024 helped by higher projected oil the GCC countries at varying degrees. Due to their output in Bahrain and Oman, while the non-hydrocar- fixed exchange rate regimes, GCC central banks have bon sector should continue to drive the Qatari econ- closely followed the aggressive policy rate increases omy, supported by continued project spending and by the U.S. Federal Reserve in its latest tightening robust consumer demand. decisions. While higher interest rates are expected to dampen credit growth for GCC banks, banks in Saudi Regional inflation is likely to remain subdued Arabia and Kuwait continue to report strong credit compared to other regions. growth driven by consumer spending and construc- tion projects (Figure 19). Inflation in the GCC, which has been well-con- tained in the past two years, is expected to ease 9 F. Fareed, A. Rezghi, and C. Sandoz, 2023, “Inflation slightly. In 2024, inflation is expected to further Dynamics in the Gulf Cooperation Council (GCC): What moderate to 2.2 percent (from 2.6 percent in 2023), is the Role of External Factors?”, IMF Working Paper and remain contained at around 2.1 percent during WP/23/263. 14 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC GCC inflation remains contained and FIGURE 18 •  …GCC banks' credit growth is FIGURE 19 •  relatively low… slowing, except for Saudi Arabia and Kuwait banks. 20 9 16 Percent change 12 6 Percent change 8 3 4 0 2022 2023 2024 2025 2026 0 Kuwait Saudi Oman United Bahrain Qatar World Emerging markets Euro Area Arabia Arab Middle East GCC Emirates Domestic credit Inflation Source: Economist Intelligence Unit, 2024; WB Macro-Poverty Outlook, SM 2024; and WB staff calculations. Source: WB Macro-Poverty Outlook, SM 2024; and Economist Intelligence Unit, 2024. With some country-specific variations, fiscal the subsequent doubling of the VAT rate in Bahrain surpluses in the GCC are expected to narrow to to 10 percent (in 2022), maintaining the VAT rate at close to zero in 2024, but recover in the medium 15 percent in Saudi Arabia, and the introduction of term, supported by oil activity and continuing federal corporate income tax rate of 9 percent in the fiscal reforms. UAE in July 2023. Divergence in individual country pros- The regional fiscal surplus is projected to further pects is expected, with Saudi Arabia, Kuwait, narrow before recovering in the medium term. and Bahrain projected to report fiscal deficits, The combined fiscal surplus for the GCC region is while the rest of the GCC will maintain their sur- projected to register a small surplus of 0.1 percent pluses (Figure 21). In Saudi Arabia, the fiscal def- of GDP in 2024—down from 0.5 percent of GDP in icit is expected to widen to 2.4 percent of GDP in 2023—to reflect continued loose fiscal spending 2024, reflecting continued expansionary fiscal pol- and the fall in oil receipts (Figure 20). In the medium icy and the drop in oil receipts. Aramco’s distribu- term, the fiscal position is expected to improve, reach- tion of performance-linked dividends, which started ing 1 percent of GDP in 2025–26—supported by the in Q3-2023, should improve the fiscal position in the recovery in oil production levels. The looser policy will medium term—supported by recovery in oil produc- enable governments, particularly those with ample fis- tion levels. Moreover, the fiscal deficit is projected cal capacity such as Saudi Arabia, the UAE, Qatar, to persist in the medium term for Kuwait, influenced and Kuwait, to bolster the non-oil sectors and offset by the current expansionary fiscal stance and weak the decline in activity in the oil sector. Furthermore, economic diversification efforts. In Bahrain, limited countries’ efforts to implement fiscal reforms will con- spending growth under the Fiscal Balance Program tinue to support long-term fiscal sustainability and and higher non-oil revenues are expected to result in macroeconomic stability. For example, in order to a lower fiscal deficit of 3.2 percent in 2024, down from diversify away from oil and increase revenue mobi- more than 5 percent in 2023. Yet, the budget deficit lization and fiscal cooperation among the GCC, the is expected to increase in 2025–26, reflecting pro- broadening of the GCC tax systems is continuing, with jected lower oil prices and higher interest burdens. Outlook and Risks 15 The GCC region is projected to FIGURE 20 •  …with divergence in individual FIGURE 21 •  register a narrow surplus in 2024 country’s positions. before widening in the medium term… 15 40 20 10 30 15 20 10 5 Percent of GDP Growth (percent) Percent of GDP 10 5 0 0 0 –10 –5 –5 –20 –10 2022 2023 2024 2025 2026 –10 2022 2022 2022 2022 2022 2022 2024 2024 2024 2024 2024 2024 2026 2026 2026 2026 2026 2026 Fiscal balance (rhs) General government revenue (lhs) Saudi General government expenditure (lhs) UAE Kuwait Qatar Oman Bahrain Arabia Source: WB Macro-Poverty Outlook, SM 2024. Source: WB Macro-Poverty Outlook, SM 2024. On the other hand, despite relatively moderate hydro- government-related entities, will remain the main carbon prices during the forecast period, continued sources of vulnerability. Budgetary financing needs fiscal discipline will keep Oman’s overall fiscal bal- will grow in Saudi Arabia in 2024, the debt-to-GDP ance in a comfortable surplus, exceeding 4 percent ratio is expected to rise to 27.7 percent, before moder- of GDP in 2024–26. Qatar’s fiscal balance will narrow ating to 25.8 percent in the medium term. In Bahrain, to 4.9 percent in 2024. However, the surge in gas out- the debt-to-GDP ratio is projected to slightly decline in put in 2025, when the North Field gas project comes 2024 but remain elevated (above 100 percent) in the online, will lead to much stronger revenues and fur- medium term—requiring deeper fiscal consolidation ther support its fiscal position. In the UAE, the intro- measures. Additionally, the implementation of fiscal duction of a 9 percent federal corporate tax in July revenue reforms in the UAE is expected to enhance 2023 is expected to expand the share of non-oil rev- fiscal buffers and overall fiscal sustainability. Although enues, which together with stronger oil revenues will debt sustainability in Oman has improved due to fis- sustain the fiscal surplus at 5.1 percent of GDP, the cal adjustments, its debt remains susceptible to inter- highest among other GCC peers in 2024. nal and external shocks. GCC region’s fiscal position will reduce The GCC countries accumulated large fis- borrowing needs in the medium term (Figure 22). cal buffers, providing resilience against future General government debt (on average) is expected external shocks. By 2030, the Gulf Sovereign Wealth to remain on a downward trajectory in the medium Funds (SWFs) could reach US$7.6 trillion in assets10 by term, from 29.4 percent of GDP in 2023, to 29.1 per- 2030 (Figure 23). The significant size of these funds cent and 27.4 percent of GDP in the medium term, allows GCC countries to mitigate the impact of vola- respectively, as fiscal positions strengthen and eco- tile oil prices on their economies and maintain fiscal nomic growth accelerates. However, oil price volatility and contingent liabilities from SOEs or more broadly 10 2024 Annual Report, globalswf.com. 16 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC Overall, debt-to-GDP ratio is on a FIGURE 22 •  …and large fiscal buffers provide FIGURE 23 •  declining trajectory for most GCC resilience against future external countries… shocks. 140 8 120 7 100 6 Percent of GDP 80 US$ trillion 5 60 4 40 7.6 3 20 4.9 0 2 4.1 3.7 3.8 2023 2024 2025 2026 2023 2024 2025 2026 2023 2024 2025 2026 2023 2024 2025 2026 2023 2024 2025 2036 2023 2024 2025 2026 3.1 1 Saudi Bahrain Oman Qatar UAE Kuwait Arabia Government debt GCC debt-to-GDP average 0 2020 2021 2022 2023 2025 2030 Source: WB Macro-Poverty Outlook, SM 2024. Source: Global SWF Data Platform and Projections. stability. Additionally, they facilitate long-term strate- increasing non-oil exports and cushioning against gic investments in key industries, such as renewable global headwinds. energy, technology, and healthcare, to diversify the economy and ensure sustainable growth in the future. The risks to the outlook are skewed to the downside… The regional external balance surplus is expected to further narrow in 2024 compared to the previous Further escalation of the conflict in the Middle year but remains in a comfortable position. East could have adverse economic implications and spillovers on the region. The regional con- The regional external balance surplus is expected flict could increase uncertainty and dampen investor to narrow before expanding in the medium term. confidence, reduce tourism, cause capital outflows The current account surplus will decrease to 7.5 per- and financial market instability, weigh on investment cent of GDP in 2024, to reflect OPEC+ oil production growth, and subsequently weaken prospects for out- cuts dragging on the external position, while oil prices put and productivity growth. These factors could indi- remain stable compared to 2023 (Figure 24). Kuwait rectly hinder the growth momentum of the non-oil and Qatar are expected to maintain double-digit sur- sectors in the GCC region. Moreover, the disruption of pluses, supported by energy exports and the growing trade routes in the Red Sea has triggered an increase tourism sector, respectively (Figure 25). In the medium in shipping costs and rerouting, including Asia-Europe term, the external balance surplus is expected to trade. This could negatively impact the transport and widen to 8.8 percent, supported by the recovery of logistics sectors, posing potential downside risks to oil production and non-oil exports. Bilateral free trade economic growth in 2024. agreements between UAE and its trading partners will A weaker-than-expected recovery in China open major markets in East Africa and South Asia, would have significant spillover effects. A slowdown Outlook and Risks 17 Current balance surplus is expected FIGURE 24 •  …mainly due to oil production cuts FIGURE 25 •  to narrow before expanding in the in 2024. medium term… 60 20 20 40 15 15 Percent of GDP 20 Growth (percent) Percent of GDP 10 10 0 5 5 –20 0 0 –40 2024 2024 2024 2024 2024 2024 2025 2025 2025 2025 2025 2025 2026 2026 2026 2026 2026 2026 –5 –5 2022 2023 2024 2025 2026 Saudi UAE Kuwait Qatar Oman Bahrain Arabia Current account balance (rhs) Exports (lhs) Services trade Prim. & second. income Imports (lhs) Merchandise trade Current account balance Source: WB Macro-Poverty Outlook, SM 2024. Source: WB Macro-Poverty Outlook, SM 2024. in China would put downward pressure on oil prices term. This includes potential disruptions in fossil fuel and demand, reducing oil GDP and revenue in the trade as the global economy moves towards achiev- GCC. Furthermore, a negative growth shock in China ing net zero emissions. The uncertain future of oil would adversely affect GCC non-oil growth in both the prices, influenced by supply (e.g., underinvestment in short- and medium-term.11 Additionally, the persistent oil) and demand (e.g., shift to low-carbon consump- fragility in the Chinese real estate market could pose tion) factors, adds complexity to the fiscal landscape. a larger-than-expected drag on growth and potentially Accelerated global decarbonization efforts could fur- lead to financial stability risks. ther strain GCC financial systems, leading to deteri- The region faces fiscal risks primarily due orating asset quality and potentially stranded assets. to its sizable public sector and state-owned enter- To navigate these challenges, the GCC must prioritize prises. Continued oil price volatility and uncertainty in building macroeconomic policy buffers, diversifying the oil market pose significant challenges to fiscal sus- their economies, and reducing reliance on extractive tainability. GCC budgets are heavily skewed towards industries. However, the rise of the green economy inflexible and high spending on wages and transfers. presents an opportunity for the GCC to capitalize on The presence of state-owned enterprises, particularly their energy sector infrastructure and expertise, par- in the UAE, as contingent liabilities add further risks to ticularly in solar and hydrogen production, leveraging the economic outlook. Moreover, the real estate boom their regional advantages in these fields. in some GCC cities could pose risks if servicing debt becomes difficult under stricter credit conditions. 11 Y. Korniyenko et al, 2023, “Gulf Cooperation Council: The region is exposed to risks associated Economic Prospects and Policy Challenges for the GCC with an abrupt climate transition over the medium Countries”, IMF Country Report No. 2023/413. 18 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC SPECIAL FOCUS: UNLOCKING PROSPERITY: 3 TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC This special focus section discusses the importance Those with more schooling consistently earn more of education quality in fostering economic growth in (Psacharopoulos and Patrinos 2020). They have a the Gulf Cooperation Council (GCC) countries. The lower likelihood of losing their job or, if they lose their section presents an overview of learning outcomes, job, a higher probability of getting a new one (Mincer a key measure of education quality in the GCC, high- 1991). Education also yields public returns as better lighting the progress in student learning overtime and educated citizens pay higher taxes because they can assessing student performance in the GCC relative access better paid jobs, and are less dependent on to countries with similar income levels. The section social entitlements and welfare, thus contributing to then provides policy recommendations on improving government budget savings (OECD 2023). Also, edu- education quality in the GCC considering relevant cation improves social mobility, especially for individ- global experiences and available research evidence. uals from disadvantaged backgrounds, and fosters social cohesion, innovation, and long-term economic growth (World Bank 2024). Education is a driver of economic I.  The potential of education to spur eco- growth when it translates into nomic growth is achieved only when it improves learning. skills and knowledge (World Bank 2019). Although increasing years of schooling is essential, it is the Education is key to improving individual and skills developed through education that determine social well-being, while propelling economic its contribution to economic growth (Barro and Lee growth and reducing poverty (World Bank 2018a). 2013; Hanushek and Woessmann 2008; World Bank Education improves individual well-being by enhanc- 2018a). This happens because the knowledge and ing their labor market prospects, including bet- skills acquired through education boost individual ter employment opportunities and higher wages. productivity, which propels economic growth (Angrist 19 FIGURE 26 • Trends in average fourth grade achievement (PIRLS and TIMSS) (a) Reading (PIRLS) (b) Math (TIMSS) (c) Science (TIMSS) 490 485 490 481 480 493 480 473 483 470 480 470 452 449 459 458 450 436 449 449 460 450 451 430 429 451 450 430 434 439 439 439 446 449 413 431 440 425 435 Score Score Score 430 442 429 410 428 431 430 398 402 410 398 430 383 420 425 390 380 410 418 385 383 390 392 370 353 377 400 350 342 337 390 391 347 380 330 330 2011 2016 2021 2011 2015 2019 2011 2015 2019 Oman UAE* Oman UAE Oman UAE Saudi Arabia* Qatar* Saudi Arabia Qatar Saudi Arabia Qatar Bahrain* Bahrain Kuwait Bahrain Kuwait Source: PIRLS 2011, 2016, and 2021. Note: * = in these countries, PIRLS 2021 implementation was delayed for a year due to COVID 2019, therefore the students who wrote the test were in 5th grade instead of 4th grade. et al. 2023, World Bank 2018a). It is estimated that learning (60 points). Math and science achievement between 20 and 50 percent of country income differ- also improved by the equivalent of 1.7 (34 points) and ences are associated with differences in actual learn- 1.8 years of learning (37 points) in the region, respec- ing (Angrist et al. 2021). tively. Five GCC countries showed steady progress in both subjects for fourth graders, with Saudi Arabia being the exception as it encountered a setback in Learning outcomes have improved II.  2015 but made visible progress towards learning in GCC countries over the past recovery by 2019. several years. Learning improvement is also visible at the intermediate level. TIMSS results show that, Over the last decade, education in the GCC coun- on average, scores at the eighth-grade level have tries has shown significant improvement with improved between 2011 and 2019 by the equivalent respect to learning outcomes, beginning with pri- of 1.4 (27 points) and 1.1 years of learning (23 points) mary education (Figure 26). Fourth graders have in math and science, respectively (Figure 27). Bahrain demonstrated considerable advancement in read- stands out for its significant progress in math, an ing, math, and science, as evidenced by their results equivalent to 3.6 years of learning (72 points), while in international large-scale assessments, specifically Qatar showed the highest improvement in science the Progress in International Reading Literacy Study with 2.8 additional years of learning (56 points). (PIRLS) and the Trends in International Mathematics Although the progress in both subjects hasn’t been and Science Study (TIMSS). Both learning assess- as promising in UAE and Saudi Arabia, both countries ments have a standard deviation (SD) of 100 points. still strive to improve learning. A general rule of thumb is that students learn about The region’s learning progress in read- 20 points (0.20 SD) per school year (Avvisati and ing, math, and science in secondary education Givord 2023). Thus, the GCC’s average improvement shows notable trends among three GCC coun- in reading in PIRLS (40 points) translates into 2 addi- tries: Qatar, UAE, and Saudi Arabia (Figure 28). tional years of learning, with Qatar leading the literacy As measured by the Programme for International improvement in fourth grade with a gain of 3 years of Student Achievement (PISA), Qatar has shown 20 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC FIGURE 27 • Trends in average eighth grade achievement (TIMSS) (a) Math (b) Science 490 481 490 477 486 465 467 465 475 470 456 470 466 473 473 457 450 454 450 452 455 457 443 436 444 430 437 430 438 420 410 411 411 431 398 Score Score 410 401 403 410 423 419 409 390 394 403 390 372 392 394 396 366 370 370 368 350 350 330 330 2003 2007 2011 2015 2019 2003 2007 2011 2015 2019 Oman UAE Saudi Arabia Qatar Bahrain Kuwait Source: TIMSS (2005–2019). FIGURE 28 • Trends in 15-year-olds' average achievement (PISA) (a) Reading (b) Math (c) Science 440 440 437 434 432 434 435 431 440 432 420 442 419 420 434 448 427 420 432 402 407 414 414 400 417 400 418 419 388 402 400 380 372 399 380 368 389 Score Score Score 380 376 386 390 360 399 360 373 379 384 360 340 340 340 349 320 320 320 312 318 300 300 300 2006 2009 2012 2015 2018 2022 2006 2009 2012 2015 2018 2022 2006 2009 2012 2015 2018 2022 UAE Saudi Arabia Qatar Source: PISA (2006–2022). remarkable learning improvements in all three sub- 2022, but consistent progress is observed in math jects over the years, with 15-year-old students and science learning among 15-year-olds. demonstrating significant advancements equiv- alent of 5.4 years of learning (107 points) in read- ing, 4.8 years (96 points) in math, and 4.2 years (83 12 Qatar has one of the largest shares of students with points) in science from 2006 to 2022.12 Meanwhile, immigrant background among all PISA-participating math scores for UAE students remained relatively countries (OECD 2023). Over the last four rounds of PISA stable but the country has experience declines in (2012 to 2022), the share of students with immigrant background in Qatar increased from 52 percent to reading and science scores since it started admin- 59 percent. It should also be noted that, unlike many istering the test in 2012. Conversely, Saudi Arabia PISA-participating countries, the share of disadvantaged saw a slight dip in reading scores by an equivalent of students is greater among non-immigrant students 0.8 years of learning (16 points) between 2018 and (31 percent) than immigrant students (20 percent) in Qatar. Special Focus: Unlocking Prosperity: Transforming Education for Economic Breakthrough in the GCC 21 TABLE 1 • Differences with respect to PIRLS 2021 and PISA 2022 average PIRLS 2021 (mean: 503 points) PISA 2022 (reading mean: 476 points) Difference Difference Country Score (points) (learning years) Score (points) (learning years) GCC average 461 –42 –2.1 406 –70 –3.5 Qatar 485 –18 –0.9 419 –57 –2.9 Saudi Arabia 449 –54 –2.7 383 –93 –4.7 UAE 483 –20 –1.0 417 –59 –3.0 Bahrain 458 –44 –2.2 Oman 429 –73 –3.7 Singapore 587 84 4.2 543 67 3.3 Ireland 577 75 3.7 516 40 2.0 Source: Authors’ estimations based on PIRLS 2021 data and Avvisati and Givord (2023). Despite recent improvements, III.  grades and subjects in the GCC countries. In PIRLS there is scope for GCC countries 2021, for example, the gender differences in favor of to further improve in learning girls were larger among GCC countries than in most outcomes. other countries. In fact, four GCC countries (Bahrain, Oman, Saudi Arabia, and UAE) were among the GCC countries fall below international bench- top seven countries with the largest gender dispari- marks in primary and secondary education, how- ties in the latest round of PIRLS. Available evidence ever their income level suggests they should be suggests that these gender differences are driven doing better than average. In 2021, the average by social norms and gender stereotypes, labor mar- reading achievement of fourth graders in the GCC ket patterns, and school characteristics (UNESCO countries (461 points) lagged substantially behind the 2022; Welmond & Gregory 2022). A recent analysis PIRLS international average (503 points), by an equiva- from Saudi Arabia has shown that boys’ performance lent of 2.1 fewer years of learning (Table 1). In contrast, tends to be disproportionately affected by school cli- PIRLS’ two top performers—Singapore and Ireland, mate, student absenteeism, and early numeracy and also high-income countries—surpassed the interna- literacy skills (Elsayed et al. 2022). tional benchmark by significant margins (4.2 years of The underperformance of GCC countries learning /84 points and 3.7 years /75 points, respec- in international learning assessments reflects the tively). This trend persists into secondary education, as high proportion of students not acquiring basic none of the three GCC countries participating in PISA proficiency skills. According to SDG target 4.1,13 the 2022 reached the international average score in read- PIRLS low benchmark of 400 points is the minimum ing (476 points) or in the other two subjects. On aver- age, the GCC countries face a reading learning gap equivalent to 3.5 years of learning, while Singapore 13 SDG target 4.1. is: “By 2030, ensure that all girls and and Ireland surpassed the international average by an boys complete free, equitable and quality primary equivalent of 3.3 and 2.0 years of learning. and secondary education leading to relevant and effective learning outcomes” (UNESCO 2023). PIRLS’ GCC has one of the largest gender gaps in low benchmark is used as a reference to measure the learning outcomes (in favor of girls) among coun- proportion of children in grades 2 or 3 achieving at least tries with available data (Figure 29). Boys tend the minimum proficiency level in reading, which is part of to consistently underperform girls across different the indicator 4.1.1. 22 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC FIGURE 29 • Score difference between girls and boys across subjects 65 60 55 49 Score difference (girls-boys) 45 39 36 35 34 35 29 26 24 25 17.5 17 14 13 15 7 5 5 4 5 1 –4 –8 –5 –15 Bahrain Oman Saudi Arabia UAE Int. average Qatar Saudi Arabia Oman Kuwait Bahrain Qatar Int. average UAE Saudi Arabia Kuwait Bahrain Oman Qatar Int. average UAE Reading (PIRLS) Mathematics (TIMSS) Science (TIMSS) Source: PIRLS 2021, TIMSS 2019 data. FIGURE 30 • Percentage of students at each benchmark of PIRLS 2021 40% 30% 20% 10% 0% Bahrain Oman Qatar Saudi Arabia UAE PIRLS average Singapore Ireland GCC countries PIRLS average and top-performers Below low Low Intermediate High Advanced Source: Authors’ elaboration with data from PIRLS 2021. reading proficiency standard for mid-primary educa- Singapore and Ireland reached the high benchmark tion. However, the most recent available results in (550 points) in PIRLS 2021, 52 percent of students in PIRLS (2021) reveal that at least one-fifth of fourth the GCC region showed minimum or insufficient read- graders in GCC countries have not acquired the min- ing proficiency for their age. To reach the learning imum reading skills expected for their age, with many performance of countries with similar income, GCC exceeding the international average of 19 percent countries would need to invest in education quality for (Figure 30). The only exception is UAE with 17 per- all, so the bulk of their student population attains the cent of students at the low benchmark. Furthermore, highest learning benchmarks. when comparing the distribution of GCC students The insufficient quality of education in GCC against that of PIRLS’ top-performers, the difference is countries is driven by several factors including out- striking. While at least 67 percent of fourth graders in dated instructional and pedagogical practices, Special Focus: Unlocking Prosperity: Transforming Education for Economic Breakthrough in the GCC 23 Share of grade eight students asked FIGURE 31 •  Pre-primary gross enrollment rate FIGURE 32 •  to memorize facts/principles by in GCC and high-income countries their science teachers (1975–2020) 70 100 60 80 50 60 40 40 30 20 20 0 Saudi Kuwait Qatar Bahrain Oman United High 10 Arabia Arab income Emirates 0 1975 1995 2015 2020 Taiwan Singapore Japan Qatar UAE Kuwait GCC average Bahrain Saudi Arabia Oman Source: World Bank EdStats database (based on data reported by countries to the UNESCO Institute for Statistics). Note: The gross enrollment rate is calculated as the ratio of total enrollment, regardless of age, to the population of the age group that officially corresponds to the given level of education. Preprimary education typically Source: TIMSS 2019 data. corresponds to children ages 3 to 5 years. limited school readiness, and less emphasis on participation in preschool education. Over the last learning. Across the GCC, teacher instruction typi- decades, GCC countries have made substantial prog- cally emphasizes rote memorization, leaving little time ress in expanding access to Early Childhood Education to develop students’ ability to learn and think critically. (ECE). The average pre-school enrollment in the GCC This context pushes aside modern methods of teach- region increased from 15.5 percent in 1975 to 58 per- ing and learning, which emphasize critical thinking and cent in 2020. Nonetheless, pre-primary enrollment lev- inquiry, as well as the development of key twenty-first- els in GCC countries are still low compared to other century skills—such as problem-solving, collaborative high-income countries (Figure 32), whose average pre- teamwork, and socioemotional and digital skills (World primary enrollment rate is 84 percent. The only excep- Bank 2019; 2021). Data from TIMSS 2019 shows that, tion is UAE, where pre-primary enrollment has increased on average, 50.7 percent of eighth graders in GCC from 21.5 to 94.2 percent between 1975 and 2020. countries are asked to memorize facts and principles in The low quality of education is the main rea- nearly every lesson (Figure 31). This is more common son behind why a child born today in the GCC is in Oman as 61.4 percent of its students are required to expected to reach only 62 percent of his/her full memorize, while this happens to 41.3 percent of stu- potential productivity (Table 2). According to the dents in Qatar only. Rote memorization is far more com- World Bank’s Human Capital index (HCI),14 GCC mon in the GCC region than in TIMSS’ top-performer countries are performing well in two out of the three countries, such as Singapore, Taiwan, and Japan, where only 21.1 percent of students are asked to mem- 14 The Human Capital Index (HCI) developed by the orize on average. Furthermore, a significant share of World Bank (2018b) measures the amount of human children in the GCC come to school with limited pre- capital a child born today can expect to attain at age paredness because of the relatively low provision and 18 considering health and education challenges prevailing 24 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC TABLE 2 • HCI 2020 by Component Education Health* Expected years of Adult survival rate to Country Survival to age 5 schooling HLO LAYS age 60 HCI Bahrain 0.99 12.8 451.7 9.3 0.93 0.65 Kuwait 0.99 12.0 383.4 7.4 0.94 0.56 Oman 0.99 12.8 423.5 8.6 0.91 0.61 Qatar 0.99 12.8 427.5 8.8 0.96 0.64 Saudi Arabia 0.99 12.4 399.0 7.9 0.92 0.58 UAE 0.99 13.5 448.0 9.6 0.94 0.67 GCC average 0.99 12.7 422.2 8.6 0.93 0.62 Singapore 1.00 13.9 575 12.8 0.95 0.88 Source: World Bank (2020). Note: *There’s no data on stunting at age 5, thus the HCI was estimated using adult survival only as the reference for health. dimensions of the HCI: child survival and adult survival. contribution to GCC economies will not be fully The exception is education. Specifically, about 99 per- released until quality of education in improved. cent of all children born today in the GCC are expected Bentour and Fund (2020) compare the contribution of to reach age 5 and 93 percent of 15-year-olds are human capital to GDP growth in a sample of 12 Arab expected to reach age 60. Nonetheless, there is sig- countries against that in two other samples: one of nificant room for improvement regarding education in Asian countries and the other of OECD developed terms of years of schooling and, most importantly, stu- countries. Arab countries fell short in both compari- dent learning. Although children born today in GCC sons, mainly when compared to OECD economies. countries are expected to attain 12.7 years of educa- While in advanced economies a 1 percentage point tion, on average, their expected learning amounts to increase in human capital leads to a 0.9 percentage only 8.6 years due to the poor quality of education pre- points increase of GDP, in the Arab world an addi- vailing in these countries.15 GCC countries lose, on aver- tional 1 percentage point in human capital translate age, 4.1 years of learning due to low education quality. into only 0.5 percentage points increase of GDP. The poor quality of education represents a major obsta- cle to the development of human capital in the region in the country where they live. Its scale goes from 0 to 1 as well as the ability of GCC countries to compete at where 1 represents the full productivity that a child would the global level with top-performing countries like attain with complete education and full health. The HCI Singapore where the expected years of schooling of a has three components: (i) survival to age 5, to take into child born today are 13.9 years, of which 12.8 years will account that children not surviving until this age will never become productive adults; (ii) school, a composite index be of real learning translating into productive skills that accounting for expected years of schooling and quality of will positively contribute to the economy. education, and (iii) health, measured by stunting at age 5 and/ or adult survival until age 60, to account for the effect of health on productivity. Improving education quality would IV.  15 The HCI education benchmark is that a person aged 18 lead to substantial economic gains is expected to have attained 14 years of quality education, namely, 14 years of actual learning. The actual years of for GCC countries. learning are assessed through a summary measure called Learning-Adjusted Years of Schooling (LAYS), which Human capital is a key element to increasing eco- combines education quantity and quality into a single nomic growth in the long run, but all its potential understandable metric (Filmer et al. 2018). Special Focus: Unlocking Prosperity: Transforming Education for Economic Breakthrough in the GCC 25 In contrast, Asian countries increase their GDP by Pathway to improving quality of V.  0.6 percentage points when raising their human capi- education in the GCC tal by 1 percentage point. The low contribution of human capital to Research worldwide has identified effective economic growth in Arab countries can be solved strategies to improve education quality, which if by improving education quality, rather than only implemented in GCC countries will boost learning improving access. Education transforms into human outcomes. The pace at which the GCC countries have capital through the knowledge and skills it provides, improved learning outcomes over the last decade has which are determined by education quality instead not been enough to draw level with countries with sim- of schooling years alone. International evidence has ilar income levels. At the current rate of progress, it shown that the effect of schooling years on economic will take the GCC countries several decades to come growth visibly diminishes when considering the quality close to OECD averages. To leverage all its human of education. For instance, in a sample of 50 countries capital potential, these countries need to invest in the in the period 1960–2000, Hanushek and Woessmann most effective strategies to improve learning. (2008) found that a 100-point improvement in stan- There are key strategies to boost learn- dardized test scores is associated with a GDP increase ing levels in GCC countries within a short period. of up to 2 percentage points. Heller-Sahlgren and These strategies focus on building foundational skills Jordahl (2023) analyzed the same 50 countries until starting from early childhood, improving teacher 2016 and unveiled a relationship of 1.3 percentage instruction, and leveraging learning assessments to points increase of GDP per capita per each 100-point guide action. improvement in test scores. On both analyses, the con- It is essential to build solid foundational tribution of schooling years to growth basically became skills from an early age since they are the cor- almost zero when considering education quality. nerstone upon which future learning and skills A PATH TO STRENGTHENING ARABIC LITERACY IN THE GCC COUNTRIES The 2021 World Bank report on the status of Arabic literacy in the Middle East and North Africa region identified a pathway to improving foundational literacy in the region. This path includes: • Set literacy goals for Arabic language learning outcomes with highest-level commitment. • Build bridge from colloquial to modern standard Arabic (MSA), harnessing common features/vocabulary between variants to help learn MSA. • Expand early MSA exposure in engaging ways. • Align instructional resources to follow a systematic phonetic approach with a focus on reading fluency and comprehension in a literature-rich environment. • Revisit Arabic language teacher education programs so that pre-service and in-service teacher training focus on effective methods of teaching Arabic with extensive practice opportunities. • Reduce achievement gaps by providing targeted support to schools with underachieving students. • Intervene early with struggling readers by assessing, diagnosing, and providing prompt remedial support. • Promote family and community awareness to help families, community groups, and the private sector understand and prioritize children’s Arabic literacy development. • Balance purposeful use of technology with proven paper-pencil methods; technology investments should be based on evidence of effectiveness and encourage more MSA listening, speaking, reading, and writing and/or streamline the work of teachers. Source. World Bank. 2021. “Advancing Arabic Language Teaching and Learning: A Path to Reducing Learning Poverty in the Middle East and North Africa” 26 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC build. Children lacking these skills are at risk of fall- thinking and learning among students, also enabling ing behind, becoming disengaged from school, and them to apply the skills and knowledge taught in the not acquiring the more advanced skills in increasing classroom and in their daily lives. Additionally, effec- demand in today changing labor market. There’s sub- tive teachers can also identify alternative pathways to stantial evidence from different countries showing support struggling students, thereby facilitating their that childcare and pre-primary education enhances learning. cognitive and socio-emotional skills for young chil- To improve teachers’ effectiveness in the dren (Heckman and Masterov 2007; Engle et al. 2011; GCC countries, the focus of teaching practice will Holla et al. 2021). The improvement of these skills need to change from the prevailing approach of reflects on school readiness and better learning in rote-memorization to stimulating critical thinking later stages of education, which lead to higher edu- skills in students. Structured pedagogy is one of the cational attainment and increased earnings in adult- most effective strategies to support teaching practice hood (Devercelli and Beaton-Day 2020; Heckman while fostering student learning (Barnejee et al. 2023; and Masterov 2007; Engle et al. 2011). Popova, Evans and Arancibia 2016). This approach ECE investments yield the highest returns aims to enhance classroom instruction with a set of in terms of future productivity, which will be coordinated inputs. These include lesson plans, mate- reflected in long-term economic benefits (World rials, and training to help teachers to deliver content in Bank 2018a; Barnejee et al. 2023). Access to qual- an effective way while addressing students’ differen- ity ECE programs foster human capital accumulation tial needs. Research has shown that this intervention even before entering primary school. By contrast, chil- increases reading and math learning by 1.15 (0.23 SD) dren whose development is not supported from an and 0.7 years (0.14 SD) (Snilstveit et al. 2015), respec- early age arrive at school well behind their peers, and tively, and that its successful implementation could the cost of providing them with remedial support to produce US$21 in benefits per each US$1 invested make up for the lost learning might be too high (World (Angrist et al. 2023). Bank 2019). There are two pre-conditions for the ben- Another successful approach is teaching efits of ECE to occur and prevail in the long run. First, at the right level—a well-proven strategy to boost children must attend quality ECE regularly. The cog- learning among students who are falling behind nitive and socio-emotional support, as well as the (Barnejee et al. 2023). This strategy entails grouping early stimulation received by children in ECE should children by learning level, rather than school grade be better than what they already experience at home or age, and providing them with teaching specifically (Barnejee et al. 2023). Second, quality pre-primary tailored to their learning needs (Angrist et al. 2023). education should be followed by quality primary edu- This approach has been effective in improving foun- cation so the positive effects of ECE on educational dational reading and math skills in primary grades attainment and earnings can compound. (Barnejee et al. 2023). Teaching by learning level can Effective teachers play a pivotal role in be done with technology (software) or with teach- enhancing learning outcomes at all levels (World ers alone. This approach can yield up to 4 additional Bank 2018a), thus providing them with the right LAYS per US$100 (Angrist et al 2020). knowledge and support mechanisms is essential. Countries must leverage the power of Ensuring access to comprehensive initial and ongoing learning assessments to make sure that all stu- training is crucial for teachers to attain teaching effec- dents are learning (World Bank 2019). The par- tiveness, as demonstrated by Popova, Evans, and ticipation of GCC countries in international learning Arancibia 2016). Effective teachers have some traits assessments has increased considerably over the in common (Beteille and Evans 2019; Hightower et al. past few years, helping them to measure overall stu- 2011; Metzler and Woessmann 2012; OECD 2011). dent learning progress against international bench- For instance, possessing the necessary knowledge marks, while also providing points of comparison with and pedagogical approaches to stimulate critical other countries. However, not all GCC countries take Special Focus: Unlocking Prosperity: Transforming Education for Economic Breakthrough in the GCC 27 part in the most relevant international learning assess- assessments instead has shown to be effective in ments, nor implement national learning assessment increasing student attainment, promoting equity of continuously. This prevents the timely identification student outcomes, and improving students’ ability to of learning areas of concern and student groups fall- learn (OECD 2005). This type of assessment helps ing behind hindering the implementation of learning teachers to identify weaknesses in student learning recovery strategies. Since international assessments promptly, so they can adapt their teaching strategy are written by a national representative sample of stu- accordingly, while still working towards national learn- dents exclusively, their results can’t be used directly ing standards. by teachers to tackle the specific learning needs of In Summary, GCC countries have made visi- their own students. This may explain why the GCC ble progress on learning outcomes across primary countries could also benefit from implementing for- and secondary education over the last decade. mative assessments. However, learning achievement in these countries is Formative assessments help teachers pro- still below international benchmarks. The insufficient vide their students with timely feedback, thus quality of education in these countries reflects on lower improving student learning outcomes (Black and human capital productivity. Addressing this human William 2010; Hattie and Timperley 2007; Roediger, capital challenge would require smart investments in Putnam, and Smith 2011). Although it is a common enhancing foundational skills from early childhood, practice for teachers to assess students regularly, instructional and pedagogical practices, and learning most classroom assessments aren’t aligned with stu- assessment. By focusing on improving education qual- dent learning outcomes nor used to adjust teach- ity, GCC countries can realize substantial economic ing practices (World Bank 2019). Using formative benefits and ensure long-term prosperity. 28 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC REFERENCES Angrist, N., Evans, K., Filmer, D., Glennerster, R., Rogers, Low-and Middle-income Countries? World Bank, F.H., & Sabarwal, S. (2020) How to improve edu- Washington. cation outcomes most efficiently. A Comparison Barro, R. J., & Lee, J. W. (2013). “A New Data Set of of 150 Interventions. World Bank. Educational Attainment in the World, 1950– Angrist, N., Djankov, S., Goldberg, P. K., & Patrinos, H. 2010.” Journal of Development Economics (2021) Measuring human capital using global 104 (September): 184–98. learning data. Nature 592, 403–408. Bentour, E. M., & Fund, A. M. (2020). The effects of Angrist, N., Aurino, E., Patrinos, H., Psacharopoulos, human capital on economic growth in the Arab G., Vegas, E., Nordjo, R. & Wong, B. (2023). countries compared to some Asian and OECD Improving Learning in Low- and Lower-Middle- countries (No. halshs-03007760). Béteille, T., & Evans, D. (2019). Successful Teachers, Income Countries. Journal of Benefit-Cost Successful Students: Recruiting and Analysis. Supporting Society’s Most Crucial Profession. Avvisati, F., & Givord, P. (2023). The Learning Gain Washington, DC: World Bank. over One School Year among 15-year-olds: Black, P., & Wiliam, D. (2010). “Inside the An International Comparison based on PISA. Black Box: Raising Standards through Labour Economics 84, p.102365. Classroom Assessment.” Phi Delta Assaad, R., Krafft, C., & Salehi-Isfahani, D. (2018). Kappan 92 (1): 81–90. doi: https:// “Does the Type of Higher Education Affect doi.org/10.1177/00317217100920​0119. Labor Market Outcomes? Evidence from Egypt Devercelli, A. E., & Beaton-Day, F. (2020). Better Jobs and Jordan.” Higher Education 75 (6): 945–95. and Brighter Futures: Investing in Childcare to Banerjee, A., Andrabi, T., Banerji, R., Dynarski, S., Build Human Capital. Washington, DC: World Glennerster, R., Grantham-Mcgregor, S., Bank. Muralidharan, K., Piper, B., Saavedra, J., Elsayed, M.A.A., Clerkin, A., Pitsia, V. et al. (2022). Yoshikawa, H., Ruto, S., & Schmelkes, S. (2023). Boys’ underachievement in mathematics and Cost-effective Approaches to Improve Global science: An analysis of national and interna- Learning-What does Recent Evidence Tell tional assessment data from the Kingdom of Us are Smart Buys for Improving Learning in Saudi Arabia. Large-scale Assess Educ 10, 23 29 Engle, P.L., L.C. Fernald, H. Alderman, et al. 2011. How is it related to high school performance Strategies for reducing inequalities and and college enrollment? A longitudinal anal- improving developmental outcomes for young ysis of third–grade students in Chicago in children in low-income and middle-income 1996–97 and their educational outcomes. countries. Lancet 378: 1339–53. Chicago, IL: Chapin Hall at the University of Farzanegan, M. R., & Gholipour, H. F. (2021). Youth Chicago. Retrieved from https://eric.ed.gov/​ unemployment and quality of education in the ?id=ED517805. Full text available at http://​ MENA: An empirical investigation. In Ben Ali, www.aecf.org/resources/reading–on–grade–​ M. S. (eds.). Economic development in the level–in–third–grade–how–is–it–related–to–hi​ MENA region. Cham: Springer. gh–school–perf/. Filmer, D., Rogers, H., Angrist, N., & Sabarwal, S. Metzler, J., & Woessmann, L. (2012). “The Impact (2018). Learning–Adjusted Years of Schooling of Teacher Subject Knowledge on Student (LAYS): Defining a New Macro Measure of Achievement: Evidence from Within– Education. World Bank Policy Research Teacher Within–Student Variation.” Journal of Working Paper, 8591. Development Economics 99 (2): 486–96. Hanushek, E. A., & Woessmann, L. (2008). “The Role Mincer, J. (1991). Education and unemployment. of Cognitive Skills in Economic Development.” National Bureau of Economic Research Journal of Economic Literature 46 (3): 607–68. Working Paper. No. 3838. Hanushek, E. A., & Woessmann, L. (2020). Education, OECD. (2005). Formative Assessment: Improving knowledge capital, and economic growth. The Learning in Secondary Classrooms. Policy economics of education, 171–182. Brief. Hattie, J., & Timperley, H. (2007). “The Power of OECD. (2011). Starting Strong III : A Quality Toolbox Feedback.” Review of Educational Research for Early Childhood Education and Care, 77 (1): 81–112. https://doi.org/10.3102/0034​ Starting Strong, Éditions OCDE, Paris, https://​ 65430298487. doi.org/10.1787/9789264123564–en. Heckman, J. J., and D. V. Masterov. 2007. The produc- OECD. (2023). Education GPS: Social and health out- tivity argument for investing in young children. comes. Retrieved from: https://gpseducation​ Applied Economic Perspectives and Policy .oecd.org/revieweducationpolicies/#!node=41​ 29(3): 446–493. 767&filter=all Heller–Sahlgren, G., & Jordahl, H. (2023). Test scores OECD (2023), PISA 2022 Results (Volume I): The and economic growth: update and extension. State of Learning and Equity in Education, Applied Economics Letters, 1–4. PISA, OECD Publishing, Paris, Hightower, A. M., Delgado, R. C., Lloyd, S. C., Patrinos, H. A., & Psacharopoulos, G. (2020). Wittenstein, R., Sellers, K., & Swanson, C. Returns to education in developing countries. B. (2011). “Improving Student Learning by In The Economics of education (pp. 53–64). Supporting Quality Teaching: Key Issues, Academic Press. Effective Strategies.” Editorial Projects in Popova, A., Evans, D., & Arancibia, V. (2016). Training Education, Bethesda, MD. teachers on the job: What works and how Holla, A., Bendini, M., Dinarte, L., & Trako, I. (2021). Is to measure it. World Bank Policy Research Invesment in Preprimary Education Too Low? Working Paper, 7834. Lessons from (Quasi) Experimental Evidence Roediger, H. L. III, Putnam, A. L., & Smith, M. A. accross Countries. World Bank Policy Research (2011). “Ten Benefits of Testing and Their Working Paper, 9723. Applications to Educational Practice.” In The Lesnick, J., Goerge, R. M., Smithgall, C., & Gwynne, J. Psychology of Learning and Motivation. Vol. 55: (2010). Reading on grade level in third grade: The Psychology of Learning and Motivation: 30 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC Cognition in Education, edited by Jose P. World Bank (2018b). The Human Capital Project. Mestre and Brian H. Ross, 1–36. San Diego: Washington, DC: World Bank. Elsevier Academic Press. World Bank. (2019). Expectations and Aspirations: Salehi–Isfahani, D. (2012). “Education, Jobs, and A New Framework for Education in the Middle Equity in the Middle East and North Africa.” East and North Africa. Overview booklet. World Comparative Economic Studies 54 (4): 843–61. Bank, Washington, DC. Snilstveit, B., Stevenson, J., Phillips, D., Vojtkova, M., World Bank (2021). Advancing Arabic Language Gallagher, E., Schmidt, T., Jobse, H., Green, M., Teaching and Learning: A Path to Reducing Pastorello, M. G., et al. (2015). Interventions for Learning Poverty in the Middle East and North improving learning outcomes and access to Africa. World Bank, Washington DC. education in low- and middle–income coun- World Bank (2022). How Children Learn to Read: tries—a systematic review. 3ie. Toward Evidence–Aligned Lesson Planning. UNESCO. (2022). Leave no child behind: global report World Bank, Washington, DC. on boys’ disengagement from education. World Bank. (2024). World Bank’s Education Welmond, M. J., Gregory, L. (2022). Educational Overview. Retrieved from: https://www.worldb​ Underachievement Among Boys and Men ank.org/en/topic/education/overview#1. (English). Washington, D.C.: World Bank Group. World Bank. (2018a). World Development Report 2018: Learning to Realize Education’s Promise. Washington, DC: World Bank. REFERENCES 31 ANNEX 1 GCC SUMMARY STATISTICS TABLE GCC selected economic indicators 2021 2022 2023 2024 2025 2026 GCC, real GDP at market price, % growth 3.6 7.6 0.7 2.8 4.7 3.5 GCC, private consumption, contr to growth % 3.0 2.4 1.7 1.6 1.4 1.4 GCC, govt. consumption, contr to growth % 0.3 1.5 0.8 0.6 1.0 0.6 GCC, fixed investment, contr to growth % 1.9 3.4 1.0 1.0 0.8 1.0 GCC, net exports, contr to growth % –0.5 2.3 –2.7 –0.5 1.3 0.6 GCC, Current Account Balance, %GDP 8.6 15.6 8.4 7.5 8.6 9.1 GCC, fiscal balance, % GDP –1.0 5.5 0.5 0.1 0.7 1.3 33 ANNEX 2 COUNTRY SUMMARY TABLES Key Economic Indicators Country Summary Tables BAHRAIN Selected economic indicators 2021 2022 2023 2024E 2025F 2026F Real GDP, % change 2.6 4.9 2.6 3.5 3.3 3.4 Hydrocarbon –0.3 –1.4 –1.3 1.3 –2.8 –2.6 Non-hydrocarbon 3.2 6.6 3.4 3.9 4.3 3.6 CPI inflation rate, average, % –0.6 3.6 0.1 1.5 1.8 2.1 Government revenues, % GDP 20.8 23.1 24.0 24.4 20.0 18.7 Government expenditures, % GDP 31.8 29.3 29.0 27.6 26.5 26.1 Fiscal balance, % GDP –11.0 –6.2 –5.1 –3.2 –6.5 –7.3 General government gross debt, % GDP 127.2 117.4 120.9 118.7 121.2 124.0 Merchandise exports, % nominal change 59.0 35.0 –14.3 5.5 5.6 2.0 Merchandise imports, % nominal change 23.1 25.7 –5.7 7.0 8.8 1.7 Current account, % GDP 6.6 15.4 6.7 7.3 6.6 5.3 Source: World Bank, Macro Poverty Outlook, Spring 2024. 35 KUWAIT Selected economic indicators 2021 2022 2023 2024E 2025F 2026F Real GDP, % change 1.3 7.9 –0.1 2.8 3.1 2.7 Hydrocarbon –0.6 13.3 –3.8 3.6 3.7 3.7 Non–hydrocarbon 3.3 3.2 3.3 2.1 2.6 1.9 CPI inflation rate, average, % 3.4 4.0 3.6 3.0 2.6 2.4 Government revenues, % GDP 44.8 47.7 50.0 53.6 54.2 54.6 Government expenditures, % GDP 52.0 45.5 56.8 59.8 62.2 62.7 Fiscal balance, % GDP –7.2 2.2 –6.8 –6.3 –8.0 –8.0 General government gross debt, % GDP 8.6 3.5 3.8 4.0 4.4 4.6 Merchandise exports, % nominal change 60.9 55.8 –19.7 1.5 –0.2 2.1 Merchandise imports, % nominal change 22.3 10.0 –10.0 –10.0 –10.0 –10.0 Current account, % GDP 23.9 32.1 29.3 22.7 21.9 20.7 Source: World Bank, Macro Poverty Outlook, Spring 2024. OMAN Selected economic indicators 2021 2022 2023 2024E 2025F 2026F Real GDP, % change 3.1 4.3 1.4 1.5 2.8 3.2 Hydrocarbon 3.8 9.4 0.0 –0.5 2.5 3.0 Non-hydrocarbon 1.9 1.2 2.1 2.5 3.2 3.9 CPI inflation rate, average, % 1.5 2.8 0.9 1.6 2.0 2.0 Government revenues, % GDP 33.0 39.7 31.5 30.7 30.1 29.5 Government expenditures, % GDP 36.1 29.6 25.9 26.9 25.9 25.0 Fiscal balance, % GDP –3.1 10.1 5.6 3.8 4.3 4.5 General government gross debt, % GDP 61.3 39.9 37.6 35.4 33.1 31.9 Merchandise exports, % nominal change 32.6 49.0 –9.4 6.8 0.4 –1.5 Merchandise imports, % nominal change 10.5 24.0 0.8 10.9 1.3 1.5 Current account, % GDP –5.4 5.0 2.8 2.9 2.6 2.4 Source: World Bank, Macro Poverty Outlook, Spring 2024. 36 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC QATAR Selected economic indicators 2021 2022 2023 2024E 2025F 2026F Real GDP, % change 1.6 4.2 1.8 2.1 3.2 4.7 Hydrocarbon –0.3 1.7 2.8 1.6 3.9 7 Non-hydrocarbon 2.8 5.7 1.2 2.4 2.8 3.4 CPI inflation rate, average, % 2.3 5.0 3.1 2.1 1.9 1.9 Government revenues, % GDP 29.6 34.6 32.0 31.5 29.5 33.0 Government expenditures, % GDP 29.4 24.3 25.9 26.6 25.4 27.6 Fiscal balance, % GDP 0.2 10.4 6.1 4.9 4.1 5.4 General government gross debt, % GDP 58.4 42.4 41.4 39.2 38.5 36.2 Merchandise exports, % nominal change 55.3 50.8 –28.9 0.2 1.3 1.3 Merchandise imports, % nominal change 1.1 25.2 –7.0 –12.5 –12.5 –12.5 Current account, % GDP 14.7 26.6 16.1 13.3 12.3 13.2 Source: World Bank, Macro Poverty Outlook, Spring 2024. SAUDI ARABIA Selected economic indicators 2021 2022 2023 2024E 2025F 2026F Real GDP, % change 4.3 8.7 –0.9 2.5 5.9 3.2 Hydrocarbon 0.2 15.4 –9.2 –0.8 9.2 2.4 Non-hydrocarbon 8.1 5.5 4.8 5.0 4.1 3.5 Government activities 1.1 4.6 2.1 2.7 4.2 4.2 CPI inflation rate, average, % 3.1 2.5 2.3 2.1 2.3 2.2 Government revenues, % GDP 27.8 30.5 30.2 32.0 33.9 34.1 Government expenditures, % GDP 29.9 28.0 32.3 34.4 34.5 33.9 Fiscal balance, % GDP –2.1 2.6 –2.1 –2.4 –0.6 0.2 General government gross debt, % GDP 26.9 23.8 26.2 27.7 26.1 25.5 Merchandise exports, % nominal change 50.2 56.7 –23.2 1.7 5.9 2.5 Merchandise imports, % nominal change 11.0 20.7 9.8 3.3 3.9 2.5 Current account, % GDP 4.8 13.7 4.0 4.2 6.6 7.7 Source: World Bank, Macro Poverty Outlook, Spring 2024. Annex 2 Country Summary Tables 37 UNITED ARAB EMIRATES Selected economic indicators 2021 2022 2023 2024E 2025F 2026F Real GDP, % change 4.4 7.9 3.1 3.9 4.1 4.0 Hydrocarbon –1.9 11.8 –2.7 5.8 7.0 6.4 Non-hydrocarbon 6.9 6.4 5.4 3.2 3.0 3.0 CPI inflation rate, average, % –0.1 4.8 3.2 2.3 2.1 2.1 Government revenues, % GDP 30.2 33.6 31.7 30.9 30.0 29.9 Government expenditures, % GDP 26.8 22.8 26.2 25.8 25.2 25.2 Fiscal balance, % GDP 3.5 10.8 5.6 5.1 4.8 4.7 General government gross debt, % GDP 35.1 31.4 29.2 27.1 25.3 23.6 Merchandise exports, % nominal change 18.8 23.1 –4.4 7.5 5.4 6.7 Merchandise imports, % nominal change 15.3 24.6 0.1 6.2 1.8 1.8 Current account, % GDP 11.5 11.7 9.1 8.4 8.3 8.3 Source: World Bank, Macro Poverty Outlook, Spring 2024. 38 GULF ECONOMIC UPDATE: UNLOCKING PROSPERITY: TRANSFORMING EDUCATION FOR ECONOMIC BREAKTHROUGH IN THE GCC 1818 H Street, NW Washington, DC 20433