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25 June 2024

Gulf growth prospects improve on global economic recovery

By Reuters
Most Gulf states will enjoy higher growth rates this year than previously expected, helped by global recovery, a Reuters poll showed.

Qatar will remain the region’s leader with a 16.1 per cent jump in gross domestic product this year thanks to massive expansion of its natural gas facilities, according to the median forecast of economists polled between January 14-25.

The previous Reuters poll in November forecast the economy of the world’s largest gas exporter would grow by 12.5 per cent this year. The latest poll was based on responses from 20 analysts.

Saudi Arabia, the largest Arab economy and the world’s top oil exporter, is expected to grow by 3.8 per cent this year, well up from an anaemic 0.2 per cent in 2009 as state spending remains high and private consumption picks up.

“In terms of real GDP, the region will do better than the US and Europe but ... it will lag Asian growth,” said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh.

“But the region is not going to witness robust growth: it is going to be a gradual recovery because the global recovery will be a long recovery and a gradual recovery,” he said.

Opec-member Kuwait should emerge from a downturn this year, growing by 3.4 per cent, a slightly faster pace than Bahrain, while Oman should see GDP growth of four per cent in 2010.

The UAE is seen growing 2.5 per cent this year, down from a November forecast of 2.9 per cent. But the world's third largest oil exporter would still improve from an estimated contraction of 1.4 per cent in 2009.

Inflation was seen staying well below 2008 record peaks this year across the Gulf after some countries such as the UAE and Qatar experienced falling prices in 2009 due to sluggish household demand, weak credit growth and lower rents.

“There is nothing on the radar that inflation is going to be a problem in 2010 even in the Gulf, where there has been quite a significant amount of public spending,” said James Reeve, senior economist at Samba Financial Group in London.

Saudi Arabia should see the highest inflation of 4.4 per cent in 2010, while the UAE was likely to have the lowest consumer price growth at 2.5 per cent.   

Single currency in 2015

Gulf states are likely to adopt a single currency in 2015 but the UAE is unlikely to reconsider joining the planned monetary union this year, said a Reuters poll.

The poll showed five economists betting on 2015 as the launch date for a Gulf common currency. One said 2014-2015 was likely, while another two respondents forecast it would not happen until 2017 and 2020 respectively given a number of technical issues still to be resolved.

Seven out of 10 economists polled said the UAE was unlikely this year to reconsider joining monetary union, and three economists said it was very unlikely to reconsider.