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GCC Region is Set for Strong Growth

Middle East : 28 December 2010

The analysis of DCCI shows that the GDP in the GCC region will see 4.6 percent growth next year.

Solid recovery and a positive outlook is expected for the entire region while the DCCI (Dubai Chamber of Commerce and Industry) expects that real GDP will rise by 4 percent this year and a further 4.6 percent for 2011.

This boost is significant after the rate recorded for 2009, when the worldwide economic troubles resulted in only 1 percent GDP growth.

Oil prices and the level of production are driving the growth according to a recent release.

Production is forecasted to rise and reach 14.7 million bpd (barrels per day) this year before hitting the 15 million bpd level next year.

The current account balance in the GCC, which saw an increase of 23.1 percent of GDP in 2008 before dropping to a 7.1 percent growth in 2009, is expected to rise by 11.8 percent of GDP for 2010 and 12.3 percent of GDP for 2011.

Based on the analysis, this pattern will see net foreign assets grow by around 110 percent of GDP for 2010 and then 113 percent for 2011.

As activities in the non-oil sector grows and the price of oil rebounds considerably, the fiscal balance in the GCC is forecasted to see steady improvements reaching nearly 7 percentage points (of the GDP) between last year and next.

Analysis also showed that the GCC nations enjoy fiscal breathing space that can be used for more stimuli this year and next, adding even more strength to the private industry demand.

Inflation pressures have continued to be weak and the GCC monetary policies are challenged to find a balance in improving credit growth while still keeping inflationary pressures at bay.

As global macroeconomic policies continue to have discrepancies, emerging economic centres such as the GCC should think about developments within their domestic growth resources to support recovery within their economies.

Even though the outlook is positive for the GCC region and the fundamentals in the area economies are strong, there continues to be risk based on the report findings.

Slower recovery across the globe could cause oil prices to decline which would have a negative effect of the fiscal balances in the GCC.

If private demand in the region continues to be weak and a tighter financial climate results in corporate worries and a drop in confidence, the trend could shift.  The growth in private credit continues to be slower and that could have a negative effect on the loan supplies for the future.

On the global scene, analysts indicate that short-term growth around the world is expected to rise by 4.8 percent this year and a further 4.2 percent for 2011.  Based on recent IMF data, a slower period is anticipated in the second half of this year and the opening half of next.

Recovery for 2010 in advanced economic centres is still expected to be positive, reaching 2.5 percent.  Emerging economic centres are expected to record 6.8 percent recovery.

Advanced economies should see around 1.8 percent growth for 2011 while emerging economies should experience even more economic recovery growth, reaching 6.2 percent for next year.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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