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Growth of 5.6% for GCC with 4.5% Percent Increase in GDP for the UAE and Saudi GDP Reaching SR 2.35 Trillion

Middle East : 14 December 2012

GCC to Experience 5.6% Growth This Year

Although growth has slowed down in the Middle East it remains higher than in other areas, based on figures from a recent ICAEW report.

Higher oil prices and substantial public spending on infrastructure drives that growth, and Arab nations need to continue with economic diversification to reduce financial risk.

The report, created to provide 138,000 ICAEW members with an economic snapshot, showed that GCC nations are expected to experience healthy growth levels of 5.6 percent this year. A decline from the 2011 levels of 7.4 percent, these growth forecasts remain substantially higher that other emerging economies in the Asian world.

Growth of more than 5 percent is positive, according to ICAEW’s Regional Director for the region, Peter Beynon. Beynon noted that other economies around the globe shrank in 2012. Dubai continues to lead in terms of growth, establishing itself as a global business hub and making investments in skills, employment and education.

Plenty of work remains for GCC nations, pushing away from an economy led by hydrocarbons to one led by skills and knowledge. Government and corporations need to step up efforts to maintain momentum in diversification.

The nations covered in this report are coined the GCC + 5, and include the UAE, Saudi Arabia, Qatar, Oman, Lebanon, Kuwait, Jordan, Egypt and Bahrain, as well as Iran and Iraq. According to the report’s conclusion, oil prices must remain high in order to meet funding levels for public spending commitments.

Sharp movements within oil revenues can be buffered by diversification, and the UAE continues to lead in this regard, expanding into a major hub of logistics, business and finance. Qatar has also experienced more growth in the non-oil sector of the economy, when compared to hydrocarbons.

Predictions for 2013 state that growth will continue to slow down, but will remain above the growth levels seen worldwide.

GDP Growth in the UAE Expected to Reach 4.5% in 2012

Last year, GDP growth in the UAE hit 4.1 percent. That growth is expected to rise to 4.5 percent for 2012, according to the Ministry of Economy.
These most recent forecasts for economic growth match earlier estimates. Back in September, the central bank reported that GDP growth in the UAE should surpass IMF estimates of 3.5 percent.

Explaining the optimism of such forecasts, the bank stated that conditions in Dubai, Abu Dhabi and the Northern Emirates, as well as rising oil prices, supported robust expansion. As outlined in the Dubai Economic Outlook for this year, growth in Dubai was around 4 percent or higher. Abu Dhabi is expected to achieve similar levels, driven by recent decisions to move forward with landmark projects and boost industrial development. The Northern Emirates will experience higher rates of government spending and oil prices are expected to remain high for the year.

Annual average GDP growth for Abu Dhabi is forecasted at 5.7 percent from next year until 2016, according to statements made by the ADDED’s Undersecretary Mohammad Omar Abdullah. Abdullah also noted that GDP growth for the current fiscal year should reach 3.9 percent in the emirate.

In terms of constant prices, the GDP of Abu Dhabi grew by 6.8 percent in 2011, climbing from Dh 567.8bn back in 2007 to reach Dh 606.6bn last year, according to recent data from the Statistics Centre Abu Dhabi.

Saudi Arabia Nominal GDP Hits SR 2.35 TR

Both external surplus levels and budget figures are forecasted to hit record highs this year in Saudi Arabia, driven by greater production and record high crude prices. Budget surpluses are forecasted to hit SR 493bn this year, with total revenues at SR 1.24tr and SR 746bn in spending, based on a report from Al-Rajhi Capital.

That surplus should decline to SR 220bn the following year, although forecasts see it rising again in 2014. Trade balance is forecasted at SR 944bn or 40% of GDP for this year, dropping to 28% of GDP or SR 669bn the following year. That figure is forecasted to remain stable at SR 678bn or 27% of GDP in 2014.

Current account balances will reach SR 609bn or 26% of GDP this year, dropping to SR 329bn or 14% of GDP next year and hitting SR 328bn or 13% of GDP in 2014.

Crude production has been increasing in the Kingdom since 2009. Average daily levels of production sat at 8.3 million bpd in 2010, and rose to 9.3 million bpd last year due to supply disruptions experienced in the region. For the opening ten months of 2012, average daily levels of production reached 9.8 million bpd, according to OPEC reports.

On average, daily production from January to October was 6 percent higher this year than last. After reaching a peak of 10 million bpd in June, production has been slackening.

When compared to the average prices of 2011, crude prices for 2012 have been relatively flat. Last year’s average Brent price was $111.3, while this year’s price sits at $112.1 Average prices for WTI Nymex crude have remained at the $95 level throughout 2011 and 2012. Arab Light prices have remained at $110.5 on average this year, near to bank expectations of $112.

The Kingdom’s nominal GDP has been healthy, although moderation is forecasted for the balance of the year. Nominal GDP growth for Q1 was 16.9% year-on-year, and 6.8% year-on-year for Q2.

Growth in the non oil sector remained strong, at 6.1% in the first quarter and 5.9% in the second quarter. Private sector growth for Q1 was 10.6 percent in the non oil sector, with 11.1 % growth in Q2.

Nominal GDP is expected to hit SR 2.35tr this year, showing 8.8% growth over the previous year, according to Al-Rajhi Capital. Growth is forecasted to flatten out for the following year, before rebounding to reach SR 2.53tr in 2014.

Saudi Arabia’s average monthly inflation from January to October was 4.7 percent. Further moderation to 4.2 percent is expected for 2013, driven down by modest levels of inflation in food and more moderate levels of inflation in rent.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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