GCC economists reluctant to predict the obvious
Posted on 23 March 2009 with no comments from readers
It is perhaps to be expected that GCC economists are reluctant to be the bearers of bad news. Yet predicting that some regional economies will avoid a recession in the face of a 50 per cent collapse in oil prices looks open to criticism as a failure to square up to reality.
On the other hand, they claim recession is only to be avoided by a whisker. The Reuters poll of 14 economists and academics yesterday forecast low or no economic growth in all the Gulf oil exporting countries, except in Qatar where gas production will mushroom this year, and Kuwait where GDP will slip by one per cent.
Saudi Arabia, UAE
The poll put Saudi Arabian GDP growth for 2009 at 0.3 per cent, its slowest since 2002, while the UAE at zero per cent will deliver its worst performance since 1993.
But is this realistic? A median of five recent forecasts suggested that Gulf hydrocarbon export revenues will be down 57 per cent this year at $249 billion. Even the prospect of geopolitical price rises is lower as the new Obama administration is being broadly welcomed.
Given the huge reliance of the GCC economies on hydrocarbon revenues and their undoubted multiplier effect on associated trade and commerce, can growth really be down and not out in 2009?
The true impact of the slump in hydrocarbon revenues will surely be higher and the economists’ models must show this. Even on the back of an envelop the fall in revenues equates to more like a quarter of GDP, although it is true that a few offsetting factors have to be taken into account to establish the position in real GDP.
Global economic recession
However, you also have to consider the impact of the biggest global economic recession since the 1930s on the wider economy of the GCC. Trade flows are clearly sharply down, as is tourism, aviation and finance.
If you put this picture together then GCC business is facing its worst slump since the First Gulf War of the early 1990s, and it is not really helpful if economists choose to hide from the facts and try to maintain an illusion that the outlook is other than reality foretells.
