Saudi Arabia and other Opec+ members extended their voluntary production cuts in December last year. AFP
Saudi Arabia and other Opec+ members extended their voluntary production cuts in December last year. AFP

Voluntary Opec+ production cuts reduce Middle East’s 2025 outlook, World Bank says



The World Bank on Thursday lowered its 2025 growth forecasts for the Middle East and North Africa largely due to the extension of voluntary Opec+ production cuts.

Growth in the region is expected to increase from 1.8 per cent last year to 3.4 per cent this year, a downgrade of 0.8 per cent from the World Bank's June forecast. Growth is expected to rise to 4.1 per cent in 2026.

“The outlook for this year has deteriorated since June, primarily due to extended oil production cuts by major oil partners,” the World Bank said in its updated Global Economic Prospects report.

Eight oil-producing nations, including Saudi Arabia, announced in December they had agreed to extend voluntary output cuts of 2.2 million barrels per day until March. The group said after that date, the supply curbs will be phased out each month through to the end of September 2026.

The World Bank had expected Opec+ to lift the production cuts by the end of last year.

Growth in countries belonging to the GCC grew by 1.6 per cent last year due to strong labour markets and a recovery of capital inflows supporting strong non-oil activity.

The World Bank also lowered its growth outlook for the GCC this year by 1.4 percentage points to 3.3 per cent because of the extension of the production cuts. Growth is forecast to increase to 4.6 per cent next year.

Among oil exporters, the UAE's economy also faces a slight downgrade. The World Bank projects the UAE's economy to increase by 4.0 per cent this year (0.1 per cent lower than its June projection) after growing 3.3 per cent last year. Growth in Saudi Arabia is estimated to be 3.4 per cent this year, 2.5 per cent below the World Bank's previous forecast.

Growth for oil importers is projected to reach 3.7 per cent this year before rising to 4 per cent next year due to stronger domestic demand amid easing inflation. Egypt's economy is projected to grow to 3.5 per cent in the 2024-25 fiscal year before expanding further to 4.2 per cent the following year due to stronger private consumption as inflation continues to ease.

The World Bank also anticipates financing from the UAE will help secure investment in Egypt.

Oman and Qatar's growth forecasts were also lowered by 0.4 and 0.5 per cent. The World Bank now expects Oman's economy to grow by 2.4 per cent this year, while activity in Qatar is set to increase by 2.7 per cent.

Projections for Iraq, Kuwait and Tunisia were lowered to 3.5, 1.7 and 2.2 per cent. Forecasts for Bahrain and Jordan were unchanged at 3.3 per cent and 2.6 per cent, while Morocco's growth forecasts were upgraded by two percentage points to 3.9 per cent.

The World Bank did not produce forecasts for Lebanon, Syria and Yemen due to a “high degree of uncertainty”.

The bank said risks for the region remain tilted to the downside due to regional conflicts and policy uncertainty, pointing to so-called unexpected global policy shifts. Further protectionist policies by trading partners could also reduce exports for oil importers.

Developing countries face 'tougher slog'

In its report, the World Bank anticipates global growth to increase by 2.7 per cent this year and in 2026, the same pace as last year, as inflation continues to moderate.

However, it warned that developing nations will have a more challenging time in reaching the income levels of advanced economies. Developing economies are expected to end the first quarter of this century with the weakest long-term growth outlook since 2000, the World Bank said.

“The next 25 years will be a tougher slog for developing economies than the last 25,” Indermit Gill, the World Bank Group’s chief economist and senior vice president for development economics, said.

The World Bank said many factors that helped these economies grow at a faster rate decades ago – such as economic integration and foreign direct investment inflows – have faded.

“In their place have come daunting headwinds: high debt burdens, weak investment and productivity growth, and the rising costs of climate change,” Mr Gill said.

Global policy uncertainty and rising trade tension also pose serious challenges for developing economies, while inflation could prolong interest rate cuts, the World Bank said.

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Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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Stage: Series A

Investors: Flat6Labs, Accel, Y Combinator and angel investors

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German intelligence warnings
  • 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
  • 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
  • 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250 

Source: Federal Office for the Protection of the Constitution

Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
Key changes

Commission caps

For life insurance products with a savings component, Peter Hodgins of Clyde & Co said different caps apply to the saving and protection elements:

• For the saving component, a cap of 4.5 per cent of the annualised premium per year (which may not exceed 90 per cent of the annualised premium over the policy term). 

• On the protection component, there is a cap  of 10 per cent of the annualised premium per year (which may not exceed 160 per cent of the annualised premium over the policy term).

• Indemnity commission, the amount of commission that can be advanced to a product salesperson, can be 50 per cent of the annualised premium for the first year or 50 per cent of the total commissions on the policy calculated. 

• The remaining commission after deduction of the indemnity commission is paid equally over the premium payment term.

• For pure protection products, which only offer a life insurance component, the maximum commission will be 10 per cent of the annualised premium multiplied by the length of the policy in years.

Disclosure

Customers must now be provided with a full illustration of the product they are buying to ensure they understand the potential returns on savings products as well as the effects of any charges. There is also a “free-look” period of 30 days, where insurers must provide a full refund if the buyer wishes to cancel the policy.

“The illustration should provide for at least two scenarios to illustrate the performance of the product,” said Mr Hodgins. “All illustrations are required to be signed by the customer.”

Another illustration must outline surrender charges to ensure they understand the costs of exiting a fixed-term product early.

Illustrations must also be kept updatedand insurers must provide information on the top five investment funds available annually, including at least five years' performance data.

“This may be segregated based on the risk appetite of the customer (in which case, the top five funds for each segment must be provided),” said Mr Hodgins.

Product providers must also disclose the ratio of protection benefit to savings benefits. If a protection benefit ratio is less than 10 per cent "the product must carry a warning stating that it has limited or no protection benefit" Mr Hodgins added.

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Updated: January 16, 2025, 7:49 PM