The recent decline in oil prices will not affect the economies of Gulf hydrocarbon exporters given the high public spending and reforms being implemented by most members, according to an official report.
The combined GDP of the six-nation Gulf Cooperation Council (GCC), home to more than a third of the world’s proven oil wealth, is projected to expand by 5.8 per cent to peak at $1.6 trillion in current prices.
Qatar will still lead growth in the region with around 8.7 per cent while growth will be about six per cent in Saudi Arabia and Kuwait, 4.5 per cent in the UAE, 4.2 per cent in Oman and 3.1 per cent in Bahrain, said the report by the Kuwaiti-based Gulf Investment Company (GIC), which is owned by GCC governments.
“Despite speculation about a further oil price decline, the GCC economies are still expanding as they are based on real growth pillars,” it said.
“The first and most important pillar is the high public spending in most member states as it accounts for nearly 35 per cent of GDP….this is coupled with the implementation of massive projects worth nearly $1.1 trillion, almost a quarter of the world’s investment in infrastructure and energy.”
The report showed Saudi Arabia and Qatar would account for the bulk of those projects which cover oil, gas, electricity and construction.
It said that despite a decline in oil prices over the past few weeks, they remained strong and suitable for the region’s economies, adding that crude prices averaged around $115 in the first half of 2012.
“Oil prices could average $95-100 in the second half of this year and this is relatively a high level…geopolitical factors have also prompted some GCC members to increase oil output and this means additional revenue and higher public spending…such developments, along with reforms being carried out by most members, will largely support their economies,” GIC said.