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07 December 2023

GCC to be $2trn economy in 10 years

The GCC will bolster its position in the global economic system. (EB FILE)

By Nadim Kawach

The economies of the UAE and five other Gulf nations are projected to nearly double to $2 trillion (Dh7.34bn) in the next 10 years and this will bolster their position in the global economic system, a Saudi investment firm said yesterday.

The combined gross domestic product (GDP) of the six Gulf Co-operation Council (GCC) countries, which control nearly 45 per cent of the world's proven oil wealth, is estimated to reach around $1trn in real terms in 2010, said NCB Capital, an affiliate of the Saudi National Commercial Bank.

Its figures showed the GCC's share of the global economy stood at only around 0.85 per cent in 1990 but swelled above one per cent in 2000 and peaked at nearly 1.54 per cent in 2008. The report expected that share to rise to 1.8 per cent in 2020 on the back of growth in the oil and non-oil sectors.

"The GCC countries are well-positioned to assume an position in the emerging new global order… the region's global weight extends far beyond the absolute numbers given its strategic importance as a hydrocarbons supplier and one of the leading global repositories of government assets," it said.

"The GCC economies' longer-term growth prospects are underpinned by enviable fundamentals in the form of robust population growth and exceptional hydrocarbons wealth, which is in turn being channeled to support the development of a more diversified economy… the region is on track to establish itself as a $2trn economy in the course of the coming decade, a near-doubling of the current size."

The study said the GCC, which was created in 1981, is also likely to grow in importance as an attractive investment destination for foreign investors with its large infrastructure projects and a growing financial services sector.

Citing international reports, it said the increase in oil supply in the coming years is expected to come mostly from the GCC, with Iraq's increasingly ambitious plans constituting the main risk factor.

The report noted that hydrocarbon supply growth from non-Opec producers is likely to remain limited as the new oil discoveries in Brazil, Kazakhstan and other countries are partly being offset by falling production in maturing fields elsewhere, including the Gulf of Mexico and the North Sea.

"Further, increasing investments in the oil sector along with improving technology will likely disproportionately favor the GCC. The International Energy Agency (IEA) expects GCC crude production to increase from the current 18 per cent share of global demand to over 24 per cent by 2020," it said.

"Although the recent oil price correction led to some 30 per cent of the GCC region's hydrocarbon projects being put on hold, activity has once again picked up. According to Proleads, the GCC countries are investing as much as $690bn in 578 projects in the oil, gas and petrochemicals sector."

Its figures showed that the overall GCC oil sector currently has a pipeline 281 projects worth nearly $304bn, of which about 89 per cent are in the construction or pre-construction phases. The corresponding figures for the gas sector are 155 projects and nearly $178bn, of which around 85 per cent are in the construction or pre-construction, it said.

Strong oil prices during the latest boom of 2000-2008 sharply boosted the economies of the GCC countries before the global fiscal distress reversed that trend in the fourth quarter of 2008 and through most of 2009.


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