3.11 AM Friday, 29 March 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:56 06:10 12:26 15:53 18:37 19:52
29 March 2024

Higher oil prices to boost Arab economy in 2010

Higher oil prices to boost Arab economy in 2010. (AP)

Published
By Nadim Kawach

Stronger oil prices will sharply boost the combined Arab economy in 2010 after recording lower growth in 2009 because of the repercussions of the global financial crisis, according to a key Arab League institution.

The collective Arab real GDP recorded one of its highest growth rates of around 5.09 per cent in 2008 due to a surge in crude prices before slowing down to about 2.9 per cent in 2009, the Cairo-based Arab Industrial Development and Mining Organization (AIDMO) said in a report on the Arab economies.

“In 2010, real growth in the Arab GDP is expected to recover by around 4.4 per cent because of higher oil prices and an improvement in domestic demand.”

The report showed the economies of Gulf states and other Arab oil producing nations will accelerate by 4.2 per cent in 2010 from around 2.2 per cent in 2009 while growth in those of non-oil Arab countries will slip to 4.5 from 4.8 per cent.

“This rate is good considering the global economic conditions…it will be aided by improving domestic demand and expectations of higher foreign investment flow into the region after a slowdown last year,” the report said.

“As for oil producing members, mainly those in the Gulf, there will be an increase in foreign and local investment and in their crude export earnings, which are projected to grow by around 7.7 per cent this year after declining by nearly 18 per cent last year due to lower crude prices and output.”

AIDMO’s forecasts about the Arab economic performance this year are compatible with those of the World Bank, which expects the six-nation Gulf Cooperation Council (GCC) to spearhead growth in the Middle East this year.

The projected growth for the GCC in 2010 is far higher than the 0.8 per cent rate recorded in 2009, when most regional economies sharply slowed down because of steep cuts in their oil supplies and slower performance in other sectors.

According to the World Bank, the strong rebound in crude prices, which have recently shot above $80 to their highest level in more than a year, was due to the rapid recovery in emerging markets, most notably Asia, and improvements in global financial conditions. US demand for oil has started growing, too, as it swelled by about 1.9 per cent for the four-week period ending April 2 compared with the same period a year earlier, the World Bank said.

Although oil prices are far below the levels reached during the oil boom years, they have moved to levels in the range between $75 and $85 a barrel – a level that is comfortable for many hydrocarbon exporters.

"As a result of these positive developments, GCC oil exporters are expected to lead the regional recovery. In 2010, growth of GCC economies is projected to rise by 3.6 percentage points compared to a year earlier," the World Bank said.

"GCC countries were hit hard by the global crisis so a return to growth of 4.4 per cent in 2010 and 4.9 per cent in 2011 represents a remarkable comeback. The expected rise in oil revenue will also enable governments in GCC countries to continue implementing supportive policies."

AIDMO said it expected oil prices to remain strong this year despite fears of slower demand because of the euro crisis.

“There are no expectations that oil prices will come under further strong pressure for the time being…this is because demand in major industrial nations is stabilizing and the spare oil output capacity in producing countries is limited.”

The report showed GCC countries, which control over 40 per cent of the world’s extractable crude resources, suffered more than fellow Arab League members from the global crisis due to a steep drop in oil prices.

It said the price drop slashed the GCC’s combined hydrocarbon export earnings by nearly 38 per cent to $469 billion in 2009 from a record high of around $753 billion in 2008, when oil prices soared to an all time high of $95 a barrel.

“The crisis has also affected other sectors, with foreign direct investment into the region plunging by around 30 per cent last year….there was also a sharp fall in tourism income and the volume of financial transfers by Arab migrant workers…the crisis has also led to a stagnation in most Arab economies, closure of some companies and a deterioration in unemployment.”