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IIF Forecasts Net Foreign Assets in the GCC to reach $1.34 Trillion in 2011


Middle East : 07 November 2010

The member states of the Gulf Cooperation Council will see an increase in net foreign assets, climbing from USD1.049 trillion at the close of 2009 to USD1.34 trillion by the end of 2011, according to the Institute of International Finance.  This increase is equivalent to 122 percent of the gross domestic product in the GCC region.

Based in Washington, IIF is a worldwide association that includes 450 financial establishments.  Fifty of those are found in the GCC.  The IIF also projects that the GCC will see their combined current account surplus increase from the 2009 amount of USD62 billion to USD119 billion this year and USD134 billion next year, mostly on the back of strong oil prices.

Deputy Director for the African and Middle East department of the IFF, Dr Garbis Iradian, stated that these surplus increases will result in USD1.7 trillion in gross foreign assets at the close of 2011.  Just over half of those assets are found in the Sovereign Wealth Fund of the member states.

Dr Iradian noted that the foreign assets in this region are considerable due to the lack of external debt loads.

Solid growth is establishing itself within the GCC.  Dr Iradian said that increasing oil prices are supporting healthy government spending and export levels, while the steadying of global trade levels and the flow of capital are also supporting growth.

After experiencing overall growth of under one percent last year, the real GDP for the region is forecasted to swell by 4.0 percent this year and 4.6 percent for 2011.  These amounts are below those experienced before the crisis and about average for levels seen in emerging nations.

Credit growth has been slow for the last 24 months as demand remains low in the private sector and provisions for non-performing loans are on the rise.

Real GDP in the UAE is forecasted to grow moderately this year, reaching 2.0 percent before rising to 3.3 percent next year after contracting 2.0 percent in 2009.  Even though the loan restructuring for the Dubai World debt load is good news, the overhang of debt in Dubai is slowing the UAE economy down.  The possibility of further restructuring deals within Dubai’s government-controlled bodies is also a drag for the economy.  Abu Dhabi has strong economic fundamentals, states Dr Iradian, but they may be dampened by the issues in Dubai.

Growth of the real GDP for oil and petro-related industry in Abu Dhabi is expected to reach 3.5 percent.  This is only a slight increase over the 2009 figures even though economic improvements have been felt worldwide.  After contracting 3.0 percent in 2009, the Dubai economy is expected to experience 1.0 to 1.5 percent growth this year.  As the real estate and construction sectors, accounting for 23 percent of the 2009 GDP, experience continual retrenchments that movement could be balanced by modest growth in core industries such as retail, tourism and trade.  Dr Iradian noted that there is a turnaround expected for the property market in the second half of 2011, which will support the strong recovery for the year.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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