GCC to earn $456bn in 2010

Strong oil prices will boost the crude export earnings of six Gulf oil producers by more than 15 per cent to nearly $465 billion in 2010 and this will expand their economies by up to five per cent, a semi- official study showed on Sunday.

From around $402 billion in 2009, the combined oil revenue of the Gulf Cooperation Council (GCC) will swell to nearly $465 billion this year, an increase of about 15.6 per cent, the government-controlled Emirates Industrial Bank (EIB) said in its latest monthly economic bulletin.

It said the increase would be a result of higher oil prices, which averaged around $75 a barrel in the first 10 months of 2010 compared with $59 in the first 10 months of 2009. It said the improvement in crude prices was due to output cuts by the 12-nation Organization of Petroleum Exporting Countries (OPEC) and the sharp decline in market speculation following the 2008 global fiscal crisis.

But EIB stressed that the increase in the income was only in nominal terms, adding that the GCC’s real earnings remain relatively low considering inflation and the weak US dollar, the official price of Opec’s oil sales.

“The increase in revenue will naturally allow the GCC countries to spending more on development and this will boost their real GDP growth by 3-5 per cent in 2010 and 2011 year….nominal growth will range between 709 per cent,” it said.

“The increase in general expenditure due to better oil revenue has also allowed the GCC countries to pull out of the clutches of the global crisis with minimal losses and to restore many economic sectors to normal…higher earnings have also enabled the GCC governments to extend massive financial support to their banking sector and this saved the sector from any serious bankruptcy cases similar to those in the United States and other Western nations.”

EIB gave no projections for the GCC economic growth this year but earlier forecasts by the World Bank and the International Monetary Fund showed they could rebound by around four per cent.

Most GCC economies recorded a sharp slowdown in 2009 mainly because of a sharp fall in their crude production in line with a collective OPEC agreement to trim supplies to prop up sagging prices in the aftermath of the crisis. Another depressing factor was the steep downturn in the real estate sector.

GCC countries—UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman—basked in their best fiscal position in 2008 after average oil prices shot up to an all time high of nearly $05 and they were pumping at near capacity.

Their combined oil export earnings peaked at around $530 billion and this expanded their consolidated nominal GCP to its highest ever level of nearly $1,023 trillion before it tumbled by over $200 billion in 2009.

According to the Saudi American Banking Group (Samba), Saudi Arabia and the UAE were the main victim as they accounted for nearly 87 per cent of the total decline in the 2009 GDP, the first fall in their collective economy in six years.

The decline followed a whopping increase of nearly $215 billion in the GCC’s GDP in 2008 over the previous year because of higher prices and output.

The surge in the GCC’s crude export earnings during the last oil boom allowed them to accumulate a massive cumulative fiscal surplus of $564 billion during 2005-2008, including about $272 billion in 2008 alone.

The surplus was estimated at about $129.7 billion in the UAE, nearly $335.8 billion in Saudi Arabia, $71.2 billion in Kuwait, $16.5 billion in Qatar, $6.7 billion in Bahrain and around $4.9 billion in Oman.

“GCC states acted very wisely when they sought to stabilize oil prices at their present levels, which allowed them to meet their development needs and at the same time took into consideration the fragile global economic situation.”