GCC to record strong growth

The economies of Gulf hydrocarbon producers grew by around 4.6 per cent annually during 20017-2011 and growth is projected to remain strong through 2012 and 2013, according to a key Qatari bank.

At 4.6 per cent annual real GDP growth, the six-nation Gulf Cooperation Council (GCC) had one of the fastest-growing economies in the world and this was mainly a result of massive public spending fuelled by firm crude prices during that period, Qatar National Bank (QNB) said in a 52-page study on the GCC.

It said the strong performance of the oil and gas sector has had a positive impact on the non-oil sector and that the revenue from hydrocarbons and their by-products are being dispersed throughout the economy via governments, financial systems and oil-linked elements of the private sectors, providing an enormousboost to the rest of the economy.

The government has a particularly strong role in this process, it said, adding that public revenue, derived largely from oil and gas exports, has been disbursed across the economy, with government spending in the GCC averaging 33 per cent of GDP in 2007-2011.

This has triggered increased activity in the non-oil sector, which grew at a rate of six per cent during this period in real terms.QNB said the exception to the subdued growth in the oil and gas sector has been Qatar’s 15.2 per cent growth rate in this sector from 2007- 2011.

It said the surge has come primarily from natural gas production in Qatar, which has more than doubled. Qatar’s non-oil and gas sector grew at 16.1 per cent in 2007-2011, more than twice the rate of the next fastest growing GCC country.

Overall, this has made Qatar, the world’s third largest gas power, the fastest growing economy in the GCC in 2007-2011 and in the world, QNB said.

“Looking forward, QNB expects the GCC to continue its strong growth trajectory in 2012-2013. QNB expects oil and gas production to stabilize,” it said.Oil production should continue to be constrained by OPEC production targets, which have been close to current production levels since December 2011, the report said, adding that additional increases in crude production targets are unlikely unless there is a major oil price spike. Overall, oil production is expected to grow at 0.5 per cent during 2012-13 while gas output is predicted to increase more rapidly, at a rate of 4.9 per cent a year in 2012-2013, mainly owing to gas-related projects reaching full capacity in Qatar and to production increases in Saudi Arabia, the report said.

It expected the oil and gas real GDP to expand by 0.8 per cent in 2012-2013 while growth in the nonoil sector will be stronger.“We expect growth in the non-hydrocarbons sector will drive the GCC economy in the next two years. This will be led by the services sector, particularly public services, as government expenditure is supported by strong hydrocarbons revenue, based on an average oil price forecast of $106 in 2012-13,” it said.“Financial services will also be a key growth sector as it benefits from strong economic activity and investment throughout the GCC economy. Our forecasts for GCC real GDP growth are predominantly driven by the expected impact of oil prices on production and inflows of revenue into the broader non-oil economy.”QNB said it saw a slight drop in oil prices in 2012 versus 2011, which will lead to a small slowdown in real GDP growth, particularly in the more oil-driven economies, such as Saudi Arabia, Kuwait and the UAE.

Qatar will be spared the slowdown in 2012 as it benefits from its first full year at new capacity production in the gas sector.

Oil production in Oman has been rising due to projects to develop its oil fields and there are targets for further increases in 2012, which will support growth.

Growth in Bahrain will be steadier, as it is more reliant on less volatile non-oil sectors, particularly services, the report said.

“In 2013, we are assuming a small increase in oil prices. This will reverse the 2012 trend, boosting growth, particularly in the heavily oil-driven economies.”

In current prices, GCC economies grew by as fast as 14.2 per cent annually during 2001-2011 mainly because of a sharp rise in oil prices, QNB said.

Nominal growth is projected to slow down to around 1.1 per cent in 2012 and 7.4 per cent in 2013 in the absence of manor increases in crude prices, it said.

“We assume that oil prices will be slightly lower in 2012 than they were in

2011, averaging $103…consequently, nominal GDP growth will be moderate with only Qatar and Oman seeing growth in hydrocarbons GDP as a result of increased production,” the report added.

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