Leaders meet amidst recovery

The heads of state of six Gulf oil exporters open their annual summit on Monday as their economies begin the trip towards full recovery after they were rocked by the 2008 global financial crisis and ensuing regional debt default problems.

Analysts believe the recovery would support decisions by the Gulf Cooperation Council (GCC) leaders to push ahead with landmark merger projects including the customs union and common market that were also victims of the crisis.

The six presidents and monarchs hold their 31st meeting in the UAE capital, which saw the birth of their political, defence and economic alliance in May 1981, nearly a year after the start of the eight-year Iraq-Iran war.

Statements by GCC officials over the past few weeks showed the summit would cover political, defence, economic and other issues while crucial resolutions could be taken regarding their plans to integrate their economies.

These include removal of obstacles blocking the customs union, such as border delays of goods and individuals, distribution of customs revenue, allowing national companies to operate in any member, and tackling the thorny issue of trade agencies that has smothered the flow of inter-GCC investment and trade.

“There is no doubt the GCC countries are in a better position to pursue their merger plans now that their economies have stabilized and moving out of the clutches of the crisis,” a Dubai-based economist said.

“As you have seen in the latest IMF reports, all GCC economies have recovered and are expected to sharply rebound this year and next year…this of course is a result of strong oil prices and the prompt actions taken by regional governments to support domestic economies just after the eruption of the crisis.”

Figures by the Washington-based Institute for International Finance (IIF) supported IMF estimates about the prospects of the GCC economies, as real GDP growth for the six members is heading for a big recovery.

After tumbling to around 0.4 per cent in 2009 from about 7.6 per cent in 2008, growth in the GCC’s GDP is projected to surge to nearly four per cent in 2010 and around 4.6 per cent in 2011, according to IIF.

Growth will be recorded in both the oil and non-oil sectors as oil prices and output have risen and regional nations have kept up high public spending.

IIF expected the GCC’s oil sector to rebound by nearly 4.8 per cent this year and around 4.2 per cent in 2011 after slumping by 4.6 per cent in 2009.

The non-hydrocarbon sector is forecast to grow by nearly 3.7 per cent and 4.5 per cent respectively after slowing to about 2.4 per cent in 2009.

Besides their strengthening economies, which account for over half the combined Arab GDP, GCC leaders meet in Abu Dhabi Monday armed with massive overseas financial assets, which were estimated by IIF at around 1,425 billion at the end of 2009. High oil prices are expected to boost those assets to nearly 1,542 billion at the end of 2010 and 1,685 billion at the end of 2011.

IIF figures showed the foreign assets would account for nearly 153 per cent of the GCC’s GDP this year and 154 per cent in 2011 compared with as high as 163 per cent in 2009, when the GDP was relatively low.
GCC leaders also meet amidst relative stability in the oil market and comfortable crude prices, which they believe are good for both producers and consumers.

“The GCC leaders are again expected to pledge their commitment to stability in the oil market as they had done in previous summits,” an Abu Dhabi-based oil analyst said. “This commitment also stipulates the need for fair prices of oil that will serve the interests of GCC states, other producers and consumers.”

GCC nations - UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman - control just over 40 per cent of the world’s proven crude resources and nearly 22 per cent of the global gas wealth. During 2010, the six members pumped in excess of 17 per cent of the world’s total crude oil supply.

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