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GCC GDP and Exports to Surge on Asian Oil Demand with Qatar in Top Three Contributors and the UAE Set to Invest $500 Million in Omani Development


Middle East : 08 March 2013

Exports and GDP Up in Saudi and UAE Due to Increased Asian Oil Demand

Oil revenue is forecasted to support higher exports and a rising GDP in Saudi Arabia and the UAE over the next few years. A majority of those revenues will derive from Asia, according to data from the HSBC.

Should Egypt’s political climate stabilize, that national economy will reap the benefits of declining energy costs and record about 12 percent export growth for the next few years.

HSBC MENA’s regional head Tim Reid noted that two themes emerge in the data for this quarter. Asia remains an important source of imports and exports for the MENA region, mainly due to rising energy demands. Also, more infrastructure development has allowed the region to move away from petroleum exports and into the export of petroleum by-products, as well as transport and industrial equipment, chemicals and textiles. Reid stated that challenges remain with political unrest and fluctuating oil prices, although long term prospects continue to be positive.

Oil and oil-related products continue to dominate exports from the UAE, with greater amounts heading to China, India and Vietnam. These three markets are growing rapidly and are forecasted to continue surging for the next few decades.

Other goods, like gold, will contribute to that growth. Imports for the UAE remain diversified in the coming years, made up of mainly industrial machinery (15 percent of imports) and transport equipment (10 percent).

Petroleum and petroleum-related products continue to dominate exports for Saudi Arabia and will be responsible for about 2.5 percent of the 7 percent annual export growth forecasted to occur from now until 2030. Another 1.8 percent growth will come from associated plastics and 0.8 percent growth from chemicals, according to the HSBC.

Many local economies remain important for Saudi Arabia’s long term prospects, including the UAE and Asian nations such as Vietnam, India and China. Exports to nations such as Brazil, Turkey, Poland and eventually Egypt will increase, along with their demand for energy. Strong import growth will be driven by transport equipment and industrial machinery.

Natural gas and petroleum products make up a majority of exports in Egypt, although the nation is expected to diversify beyond these sectors with reduced production levels, according to the HSBC report. Fast development in the chemicals sector will push that industry into the forefront. Over the next couple of years, chemicals are expected to grow by 18 percent annually, and between 13 and 14 percent growth is expected in the time period leading up to 2030. Double digit growth is also expected in mineral manufactures, wood and textiles.

HSBC Bank Middle East commercial banking head Fadi Fattal noted that Qatar has seen major increases in trade over the last year. Higher levels of development activity within Qatar’s infrastructure and greater investments in education and health care have also been positive for the nation. Several other sectors have reported growth, including FMCG, electronics and vehicle imports, as well as petrochemical exports. The UK, India, China, Japan, Germany and the UAE continue as the main trading partners for Qatar. Fattal stated that the outlook remains positive in Qatar, with continued growth and evolution expected.

Record High Nominal GDP in GCC With Qatar in Third Spot

The GCC region reported a new record for nominal GDP, recording an increase from $1.44tr in 2011 to $1.56tr in 2012. Qatar contributed 12.3 percent of that amount, or $192bn, according to Al Sharq’s quotation of research performed by an international bank.

Saudi Arabia remained the top contributor, responsible for 47 percent of the GCC’s total gross domestic product. The UAE brought in 23 percent for second place. If Qatar continues to experience 5 percent annual growth in GDP over the next five years, that nation will surpass the UAE to become the second largest contributor to the region’s GDP.

UAE Directing $500 Million to Oman for Development

The UAE is scheduled to direct $500 million to Oman this year, for projected development and to honour a previous pledge of $2.5 billion made in 2011.

The Abu Dhabi Fund for Development’s chief Mohammed Al Swaidi noted that $0.5 billion will move from the UAE government as part of the grant included in the GCC programme. The minister responsible for financial affairs met with the minister of state for financial affairs to discuss the transfer.

Darwish bin Ismail Al Balushi and Obaid Humaid Al Tayer discussed boosting ties between financial firms in each country, as well as the timeframe of this contribution and the mechanisms involved in the development programme.

A decision was made by all of the GCC states back in March of 2011, establishing a fund of $20bn for development in Oman and Bahrain. Both of these regions have fewer energy resources, when compared to the other four GCC member states.

The railway project will require part of Oman’s $10bn fund, and several other infrastructure projects around the nation will benefit from the grant.

Utilization of the aid is still in the discussion stages, with specific projects being identified, according to Al Balushi. Besides the Al Batinah Expressway and the railway project, water networks, electricity networks and infrastructure within the Duqm Special Economic Zone are expected to receive some of the funds.

This financial aid was originally decided upon by the four GCC states, with the aim of aiding Oman and Bahrain. Now, the investment is considered a bilateral issue, with each of the four states committing $5 billion in aid to be equally split between Oman and Bahrain.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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