Oil revenue slump to rebound pushing up GCC growth says IIF
Posted on 17 May 2010 with no comments from readers
The six nations of the Gulf Cooperation Council came very close to zero growth last year with oil revenues tumbling from $570 billion in 2008 to $323 billion, according to the Institute of International Finance.
However, this near zero growth estimate is reliant on a controversial assertion that GCC economies grew their non-oil sectors by 2.7 per cent in the worst global recession since the Second World War.
Stimulus package
It is true that the $450 billion Saudi stimulus package was the largest in the world. But that still had to compensate for a huge drop in regional trade and commercial activity, and a slump in real estate and construction.
Only a Washington-based forecasting organization could boldly turn up in Dubai and tell an audience of journalists that 2009 was in fact not a bad year. Those of us who live in the GCC would have to beg to differ. The raw data might tell one story, the reality was something completely different.
The IIF expects the GCC to shift to a growth path of four to five per cent over the medium term with oil and gas revenues recovering to $419 billion in 2010 and $457 billion in 2011. Regional GDP growth is estimated at 4.4 per cent this year and 4.7 per cent next year.
Leading the pack will be Qatar with 13.9 per cent GDP growth in 2010; then Oman 5.1 per cent, Saudi Arabia 4.4 per cent, Bahrain 3.7 per cent, Kuwait 3.2 per cent and last the UAE at two per cent, still weighed down by the problems of Dubai.
Downside risks
But the forecasters did concede downside risks from lower than expected growth in Europe and Japan impacting on oil prices, trade and tourism. The IFF also expects non-performing loan levels to rise in the GCC, though with capital adequacy ratios high this should pose no systemic risk.
The GCC is still rich with per capita reserves far ahead of China. The IIF forecasts GCC net foreign assets will rise from $1,049 billion at the end of 2009 to $1,340 billion by the end of 2011, equivalent to 122 per cent of GDP.
That is quite a contrast to many developed economies with debt ratios close to or exceeding 100 per cent of GDP. The situation in the GCC is the exact inverse, a far more healthy financial situation to be sure, and one that ought to virtually guarantee medium to long term outperformance.
