GCC poised for robust growth

Indicating a solid recovery outlook for the region as a whole, an analysis by Dubai Chamber of Commerce & Industry (DCCI) indicates the real GDP is expected to grow by 4 per cent and 2010 and 4.6 per cent in 2011.

This is a significant growth considering the overall GDP growth of 1 per cent in 2009 when the global economic crisis reached the region's shores.

The rebound in oil prices and production levels is aiding this growth, an official release said on Thursday.

Oil production is expected to increase to 14.7 million barrel per day (bpd) in 2010, to reach 15 million bpd in 2011.

Therefore, GCC current account balance, following surplus of 23.1 per cent of GDP in 2008 fell to 7.1 per cent in 2009 and projected to increase to 11.8 per cent of GDP in 2010 and 12.3 per cent of GDP in 2011.

According to the analysis, this will result in a large build up of net foreign assets of about 110 per cent of GDP in 2010 and 113 per cent in 2011.

Again, with the rebound in oil prices and non-oil sector activity, GCC fiscal balances are expected to improve significantly by almost seven percentage points of GDP between 2009 and 2011.

The analysis further revealed that the GCC countries have fiscal space to maintain additional stimulus in 2010 and 2011 that will be capable of strengthening private sector demand.

With inflationary pressures remaining subdued, the short-term challenge for the GCC monetary policy is to balance the revival of credit growth while mitigating a potential resurgence of inflationary pressures.

Also, with the divergence in the global macroeconomic policy directions, emerging economies including GCC need to reconsider developing domestic resources of growth to sustain economic recovery.

Challenges Ahead

Despite the positive outlook for the GCC economies and their robust fundamentals, some downside risks remain, according to the report.

Slow recovery of the global economy might reduce oil prices and consequently worsen the fiscal and the external balance.

Persistence of weak private demand and tight financial conditions might lead to an increase in corporate distress and loss of confidence. Continued slowdown in private credit growth might constrain further loan supply.

Outlining the international scene, the analysis indicated a short-term growth outlook for the global economy which is projected to expand by 4.8 per cent in 2010 and 4.2 per cent in 2011, with a slowdown during the second half of 2010 and the first half of 2011 (IMF, 2010).

On the other hand, economic recovery outlook in 2010 for advanced economies are expected to be around 2.5 per cent and 6.8 per cent for emerging economies.

In 2011, advanced economies are expected to grow by 1.8 per cent whereas emerging economies are expected to enjoy higher rate of economic growth of about 6.2 per cent.

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