Massive fiscal rescue programmes in Gulf oil producers have successfully cushioned the impact of the global financial distress and reasserted the position of their region as a key investment target, according to the United Nations.
Despite a sharp cut in their crude output in line with Opec's collective supply reduction agreement, the combined economy of the six Gulf Co-operation Council (GCC) countries could have slipped by only about 0.2 per cent in 2009 but is projected to rebound by 3.9 per cent this year, the Beirut-based UN Economic and Social Commission for West Asia (ESCWA) said in a study.
For the whole Arab region, the gradual recovery of the global economy after a recession of more than a year contributed to improving the economic sentiment from pessimism to cautious optimism, said ESCWA, which groups the GCC along with seven other Arab countries.
In the GCC, a surge in oil prices after a sharp fall in the fourth quarter of 2008 and the first quarter of 2009 created an optimistic mood and placed the six members on the road towards full recovery in 2010.
"Moreover, several worst-case scenarios have not happened at the present phase of the global financial crisis. A balance-of-payment crisis and associated currency devaluation did not materialise even in the countries where the current account positions were weak. The once feared reverse mass migration of expatriate workers from the member countries of the Gulf Cooperation Council (GCC) did not take place," the study said.
"The monetary authorities in the region successfully defended the respective banking sector from the global financial crisis. The fiscal authorities in the region successfully took an active stance to cushion the impact from the global recession. The region's strategic geographical location has been re-approved in the efficiency drive of international investors and traders."
ESCWA's figures showed the average real GDP growth in its member states stood at about1.4 per cent in 2009 compared with 5.8 per cent in 2008. It forecast growth at about 4.3 per cent in 2010, adding that the recovery of both external as well as domestic demand with the support of active government fiscal measures is expected to lead the recovery.
The average crude oil price in the Reference Basket of the Organisation of the petroleum exporting countries (Opec) is forecast for 2010 between $45.6 and $83.2 per barrel, with a median forecast of $63.7, it said.
Against the median forecast, the oil export revenue in the region is projected to recover with a positive growth of nearly 9.6 per cent in 2010, after having contracted by about 38 per cent in 2009 due to lower prices and output.
"In the GCC member countries, despite the weak performance of stock markets and the real estate sector, the delay in private sector projects, and the rapid decline in commercial and residential rental prices, a considerable portion of economic actors and policymakers in this region still regarded economic fundamentals in their countries as sound," ESCWA said. This optimism is a crucial drive for forward-looking behaviour of consumption and investment."
The report said the GCC's combined real GDP was expected to have slipped by about0.2 per cent in 2009 mainly because of the compliance by OPEC members with the supply cuts approved by the organisation.
"Due to the readiness of authorities to provide fiscal support, domestic demand in the GCC is not estimated to have shrunk in parallel with the GDP estimates. It is the component of significant reduction in net exports that caused the real GDP estimation," the report said.
"The prospects for 2010 depend on a recovery of external demand and crude oil prices; a continuous active fiscal stance; and a smooth balance sheet adjustment of economic actors, particularly banks, business entities and households. The forecast of real GDP growth of GCC economies for 2010 is at 3.9 per cent."
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