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High Oil Prices Boost GCC Economies by $305 bn

Middle East : 13 November 2011

Source: Oman Daily Observer

A surge in oil prices to their highest average of around $109 a barrel this year will swell the revenues of GCC states by a staggering $305 billion, taking their current account surpluses record highs. Forecasts by a prominent international think-tank show that the bulk of the increase in the nominal GDP of the six-nation Gulf Cooperation Council (GCC) will be in the hydrocarbon sector due to high prices and production by members.

From around $1,075 billion in 2010, the GCC’s combined GDP will climb to nearly $1,380 billion in current prices this year, its highest ever level and far above the previous peak GDP of $1,138 billion in 2008. The report by the Washington-based Institute for International Finance (IIF) showed the surge this year would be a result of a record high oil price of $109 a barrel, breaking the previous record price of $98 in 2008.

Crude production by the six members, including the oil heavyweights Saudi Arabia, Kuwait and the UAE, is also expected to soar by about 1.2 million barrels per day (bpd) to 16.4 million bpd in 2011 from 15.2m bpd in 2010. A breakdown showed the GCC’s oil sector would swell to nearly $738 billion this year from $494 billion in 2010 while the non-hydrocarbon sector is expected to expand to $642 billion from around $581 billion.

Real GDP is forecast to grow by 6.7 per cent, including a10.8 per cent rise in the oil sector and 4.2 per cent in the non-hydrocarbon economy. The IIF forecast the private sector to grow by 3.7 per cent and the public sector by 5.3 per cent. The report expected oil prices to recede to an average $97 in 2012 but saw an increase of 400,000 bpd in the GCC’s crude output. It said the rise in output would offset the price drop and keep the group’s nominal GDP at as high as $1,378 billion in 2012, just $2 billion below the 2011 expected level.

It estimated the GCC’s gas production would grow from 5.4 billion cubic metres (bcm) a day in 2010 to 6.3 bcm per day in 2011 and 6.6 bcm a day in 2012. Qatar, the world’s third largest gas power, will pump 2.5 bcm a day during 2011-2012. IIF estimated the GCC’s foreign assets at around $1,513 billion and expected them to soar to $1,708 billion in 2011 and $1,869 billion in 2012.

It showed the oil price surge would push the alliance’s current account surplus to an all time high of around $293 billion this year compared with $151 billion in 2010. The surplus is projected to fall back to nearly $213 billion in 2012. The six GCC members sit atop more than 40 per cent of the world’s extractable oil resources and 20 per cent of the global gas deposits.

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