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A sharp rise in oil revenues boosted the external fiscal surplus of the six-nation Gulf Co-operation Council (GCC) countries to a record $225 billion (Dh825bn) in 2007 and the balance could swell further this year, the International Monetary Fund (IMF) said on Tuesday.
The massive surplus, in sharp contrast with a painful deficit during the 1990s, allowed the six members to increase domestic spending, push up growth rates, expand investments in the Arab region and accumulate a staggering $2 trillion in foreign assets, said Mohsen Khan, Director of the Middle East and Central Asia Department at the Washington-based IMF.
The surge in their economies triggered a capital influx, with the total foreign direct investment (FDI) into the six members surging to a record $40bn last year, Khan told an Abu Dhabi conference on GCC reforms.
“Because of high oil revenues, the GCC countries are recording high growth rates and their current account is recording very large surpluses,” he said.
IMF figures showed the surplus swelled to a record $225bn in 2007 from around $200bn in 2006 and $160bn in 2005. It was estimated at $80bn in 2004 and less than $20bn in 2000, while it suffered from a persistent deficit in most years during the 1990s.
Khan gave no breakdown for the current account surplus, but Saudi Arabia is estimated to have accounted for more than half of the 2007 surplus. It was followed by the UAE, which is expected to have recorded a surplus of $35bn last year.
“It is not only the current account but the non-oil GDP in the GCC is also recording very high growth rates,” Khan said. “Because of such high surpluses, which allow some members to transfer more than 20 per cent of the surplus to savings abroad, the combined GCC foreign assets peaked at $2trn at the end of 2007 and they could increase further this year.”
Khan said the oil GDP recorded low growth of around one per cent last year because production remained almost unchanged, while the non-oil real GDP jumped by an estimated eight per cent. He estimated the combined GDP of the six members, which control more than 45 per cent of the world’s recoverable crude resources, at around $800bn last year.
“Despite their high population growth, the per capita income in the GCC countries is also recording high growth. Last year, it peaked at nearly $70,000 in Qatar, the highest in the Middle East, it was around $42,000 in the UAE and nearly $33,000 in Kuwait,” Khan told the conference.
“This economic boom has also largely boosted FDI in the GCC. It was estimated at $40bn last year compared with $35bn in 2006, nearly $27bn in 2005 and $13bn in 2004. This has also created strong demand, which along with other factors is stoking inflation in the GCC.”
Khan’s forecasts for 2008 showed domestic demand would remain very strong and the current account surplus would increase further. “The GCC countries will continue to play an important role in the region in the medium term.”
Strong oil prices have sharply boosted the GCC’s income over the past few years, turning their fiscal deficits into surpluses, accelerating their economies and allowing them to replenish their eroding currency reserves and foreign assets.
From only $57bn in 1998, GCC oil revenues jumped to $299bn in 2006 and around $315bn last year.
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