Growth in the GCC economy is expected to return to normal long-term levels, while also transforming into a broad-based economy, according to National Commercial Bank’s chief economist Doctor Jarmo T Kotilaine.
Dr Kotilaine noted that relatively stable conditions within the public and hydrocarbon sectors will be complimented by sustained private sector rebounds, as bank lending continues to recover in most areas of the region.
Kotilaine also noted that despite uncertainties in the global economy, economies within the GCC remain on track for a strong 2012. The overall regional GDP is expected to experience 4% growth.
Most of the budgets tabled within the region include higher levels of government spending and greater emphasis on the paradigm of inclusive growth that became evident in 2011. As expected, priority was placed on health care, infrastructure and education, with greater amounts of resources going to social expenditures, housing and job creation.
Oman and Saudi Arabia remain committed to some of the highest levels of public sector spending seen in the region’s history, although the UAE is headed toward fiscal retrenchment again, according to Kotilaine.
Dubai is dedicated to trimming the Emirate’s deficit, while the broader government sector continues to rationalize greater leverage levels resulting from years of boom. On the other end of the spectrum, Abu Dhabi is bringing several stalled infrastructure projects on track once more.
As the US looks at continuing the trend of close-to-zero rates, monetary conditions in the GCC remain benign.
Growth in money supply is healthy and credit growth continues to surge across the GCC region, with double digit growth seen in many member-state economies. Saudi continues to experience encouraging levels of growth, with high levels of private sector lending. Kuwait is experiencing delays in bank credit due to government spending and politics, while expat remittances and tightening credit standards have affected bank credit in the UAE.
Inflation remains stable and should continue unchanged across the region, although rising government spending has resulted in some pressure.
Saudi Arabia Experienced 6.6 Percent Growth in Fourth Quarter
The GDP of Saudi Arabia increased by 6.64 percent from Q4 of last year to Q4 of this year, increasing from 5.1 percent growth during Q3.
Oil sector expansion hit 6.13 percent in Q4, according to a recent report by Riyadh’s Central Department of Statistics & Information. GDP for the oil sector hit SR 82.66 billion during Q4 of 2011.
Private sector growth reached nearly 10 percent, vastly overtaking the 3.6 percent growth experienced by the public sector. GDP in the private sector reached SR 112.91 billion for Q4, compared to the 2010 figure of SR 102.75 billion.
Expansion in the construction sector reached 13.3 percent as a result of the real estate boom and greater infrastructure spending.
Saudi exports rose in value in February, reaching SR 38.61 billion, a 32 percent increase over the SR 29.30 billion reported in the previous year’s period. Saudi imports were over 4 million tonnes, compared to 3.135 million tonnes in the same period of the previous year.
Real GDP in Kuwait Expected to See 4.5 Percent Growth
Increasing oil production and higher levels of government spending should result in 4.5 percent growth for Kuwait GDP, according to a Global Investment House report.
Government revenues are forecasted to hit KWD 29.5 billion for the 2011-2012 year, with an expected surplus of KWD 10.1 billion, assuming the nation reaches the high levels of budgeted spending (KWD 19.4 billion).
The surplus is expected to fall between KWD 600 million and KWD 11.2 billion for the 2012-2013 year, based on worst case and best case scenarios. In any case, Kuwait is forecasted to report the nation’s fourteenth straight surplus in the current fiscal year.
Inflation in February 2012 fell to 3.8 percent, down from 5.3 percent in February 2010. International prices of commodities and food are forecasted to ease over the next few months, with domestic credit experiencing cautious growth. Inflation is expected to decrease in the short term.
IMF expects inflation in Kuwait to reach 3.4 percent with the EIU expecting Kuwaiti inflation to hit 4.4 percent.
The Kuwaiti stock market fell 19.8 percent year-on-year, resulting from global uncertainties and internal political conditions, and reaching 179.3 points by the close of 2011.
The Investment Index posted the highest drop, reducing its value by 30.4 percent. Declining trading activities throughout 2011 resulted from lower trading volumes (falling 49 percent) and lower trading values (shrinking 52 percent).
Market capitalization declined by 19 percent year-on-year, falling by KWD 6.9 billion. A marked increase in trading activities for the first quarter of 2012 – quarter-on-quarter value traded increased by 94 percent, with year-on-year value rising by 17.2 percent. This increase indicated that investors have an improved sentiment and trading appetite. The Global General Index also increased by 2.2 percent over the opening quarter, according to the report.Paul Holdsworth, Staff Writer, Gulf Jobs Market News