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The GCC Outlook

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Structural strengths

We believe strong structural drivers, favourable demographics and growth ambitions make the Gulf Cooperation Council (GCC) unique.

Balance sheet strength and robust public finances, an evolving reform agenda, and the drive to diversify through a focus on non-oil growth are supportive factors for the region’s six economies – Saudi Arabia, UAE, Qatar, Bahrain, Oman and Kuwait. The region looks well-placed to outperform its developed and emerging market peers.

Granted, recent geopolitical tensions and increased uncertainty about the global macro environment have taken a toll. But GCC countries have remained steadfast in their commitment to long-term development and investment. This has made the GCC a focus for many investors.

Forecast growth in the GCC non-oil economy, 2024 (HSBC)
30 million
Foreign nationals live in the GCC

But what trends are investors watching? We see compelling changes across a number of the nine themes* that we follow at HSBC Global Research – from demographics and future cities, to trade flows and energy transition.

From a demographics perspective, the growing but young labour force is well educated with smaller households and rising female workforce participation rates. A typically higher household income is leading to higher discretionary spending.

The region is also unique in that it is the home to 30m foreign nationals who make up more than half of the population. This ratio ranges from 40% in Saudi Arabia and Oman to 90% in Qatar. Government organisations in the UAE, among others, are further relaxing visa requirements to attract foreign nationals.

These demographic changes lead to shifts in how, where and what future consumers purchase. Take health products, for example. Typically, consumption increases with age; the median age in Saudi Arabia – to give one example – is forecast to rise to 33.4 years by 2030 from 30.6 years in 2023, according to reference website Worldometer.

Changing consumer tastes go hand in hand with the further development of the non-oil industries. Policymakers often see travel, tourism and leisure as key to the region’s long-term future, for instance. Saudi Arabia has invested heavily in sports and events and will host Expo in 2030 and the FIFA World Cup in 2034. Trojena, the mountaintop resort and destination for the 2029 Asian Winter Games, is on course for completion in 2027.

Demographic changes also have implications for the development of future cities. Urban development is a major part of national development strategies across the region. Saudi Arabia is rolling out new giga-projects and supporting infrastructure as part of its Vision 2030. Dubai and Abu Dhabi are already busy building higher sustainability standards into new communities, as well as retrofitting existing properties.

The heavy rainfall and resultant flooding across the GCC in the first half of 2024, meanwhile, served as a reminder that these developments need to be able to handle extreme levels of storm water.

Trade flows are also evolving and present potential opportunities. Economic connectivity between Asia and the Middle East is growing particularly fast, expanding beyond energy trade. Annual two-way goods trade is projected to more than double from around USD950bn in 2022 to over USD1.9trn by 2035, while two-way investment, led by the China-Saudi and India-UAE corridors, could surge to USD36bn annually by 2035.

The theme of energy transition is also highly relevant to the oil-rich region. A key focus for 2024 will be how each fossil fuel company chooses to translate a global push to transition away from fossil fuels in energy systems into its own specific strategy. Last year the UAE became the first in the region to introduce a 2030 emissions target based on a fixed baseline (2019), and it also introduced fixed-baseline targets for individual sectors.

In all, we think the substantial changes taking place in economies across the GCC provide plenty of reasons for investors to pay attention.

HSBC GCC Exchanges Conference takeaways

From our notes in London

At this year’s GCC Exchanges Conference, HSBC hosted 85 corporates, including the seven regional stock exchanges, and over 200 clients in London (10-13 June). In all, sentiment ranged from enthusiasm about the region’s commitment to economic diversification and a growth mindset, to cautiousness around key issues, like liquidity challenges and a difficult global macro environment.

Many conversations centred on demographic trends for the region and how this would play into areas including consumer demand, ranging from staples to tourism, the supply dynamics in healthcare and the expat-driven outlook of the real estate market. With nearly 30 financials companies in attendance, there was a diversity of conversations against country-specific backdrops. Technology was in the spotlight when it came to future telecommunications initiatives in the region, including mega projects, as well as for insurance players, targeting addressable markets and cost initiatives. For oil & gas and utilities companies, the overarching theme was expansion, while for chemicals, there lacked the expectation of any real recovery in H2. And, as expected, we heard questions across the board around M&A and liquidity.

For more takeaways, subscribers to HSBC Global Research can read our conference takeaways in Ambitions aligned*, review our analyst takeaways on the influences on the GCC banking sector* with Aybek Islamov, Chemicals' challenging outlook* with Sriharsha Pappu, and Dubai's property pressures* with Stephen Bramley-Jackson.

Would you like to know more? Click here to read the full HSBC Guide to the GCC*, including views on companies based in the region. Please note, you must be a subscriber to HSBC Global Research to access these links.

To learn more about HSBC Global Research, including how to become a subscriber, please email us at AskResearch@hsbc.com.

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