GCC to grow 5.4% in 2010: Report

The economies of Gulf oil exporters are expected to rebound sharply by around 5.4 per cent in 2010 and 6.6 per cent in 2011 after a sharp slowdown in 2009, according to the government-controlled Emirates Industrial Bank (EIB).

In a study on economic prospects for the six-nation Gulf Cooperation Council (GCC), EIB said a surge in Qatar’s GDP would lead growth in the region this year and in 2011 given the country’s sharp rise in LNG exports.

But EIB stressed that more efforts are needed by the GCC countries to ensure full recovery from the repercussions of the 2008 global fiscal distress, saying such moves should include restructuring of the tottering property sector.

Citing its own projections and estimates by the International Monetary Fund and other institutions, EIB put average real GDP growth in the GCC at 5.4 per cent this year and 6.6 per cent in 2011 compared with 0.4 per cent in 2009.

It gave no breakdown for all GCC members but said Qatar would spearhead growth with a rate of 16 per cent while Kuwait would record 2.3 per cent.

“These are good indicators but this does not mean the GCC countries have totally overcome the effects of the crisis…more measures are needed to be taken to stimulate some sectors, mainly those which were affect most by the crisis, such as the real estate sector,” the study said.

“Tackling these effects will not be easy as it needs strenuous efforts and a long time despite a sharp rise in public spending and expectations that oil prices will remain high next year…GCC states have the resources to tackle these problems but the most important thing now is to consider restructuring the real estate sector and extending more support for affected banks and other companies.”

EIB also said it saw what it described as an imbalance between supply and demand in some sectors in the GCC, which controls over 40 per cent of the world’s recoverable crude deposits.

“Another main element is that the GCC economies are directly linked to the global economy given their heavy reliance on oil sales…their economies will be affected by any fluctuations in the global economy in the next period while the surge in the price of some commodities will lead to higher inflation in the Gulf.”

EIB’s forecasts for Qatar were similar to those by the IMF which also expected that country’s real GDP to race by nearly 18.6 per cent in 2011.

IMF projections also showed the UAE economy, the largest in the Arab world after the Saudi economy, would swell by 2.4 per cent in 2010 and 3.2 per cent in 2011. Saudi Arabia’s GDP is forecast to expand by around 3.4 and 4.5 per cent in the same period while that of Oman and Bahrain will likely rise by 4.7 and four per cent respectively in 2010. In 2011, their economies are projected to grow by nearly 4.7 and 4.5 per cent, according to the Washington-based IMF.

The IMF and other establishments based their predictions for growth rates in the GCC on higher oil prices and production as well as an expansion in the private and non-hydrocarbon sectors as well as heavy public spending.

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