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Robust Economic Conditions Expected in the GCC

Middle East : 30 January 2012

Qatar On Path to Strong Growth

Qatar’s economic outlook continues to be strong in the first quarter of 2012 with the support of a busy energy sector, according to a recent BOI (or Business Optimism Index).

Essential to diversification, the non-hydrocarbon industry reported more moderate results in the final quarter of last year. The survey also noted that expansions are in the plans in response to strong growth throughout the national economy.

Dun & Bradstreet South Asia Middle East worked with QFC (or Qatar Financial Centre) to release the BOI covering the first quarter of 2012 at a local media briefing.

The BOI for Qatar revealed a resilient nation, despite worldwide economic uncertainty and financial concerns in Europe.

Two important elements of the BOI reported high results. The hiring expectations was strong, as was the LSP (or Level of Selling Prices) which rose from fourth quarter of 2011 results of 10 to 23 during the first quarter of 2012.

The non-hydrocarbon sector’s Composite Index came in at 40 for the opening quarter of this year, five points below the results from Q4 2011. Around 45 percent of the respondents in the non-hydrocarbon industry have investment and expansion plans, up from only 35 percent in the previous quarter.

D&B Middle East’s general manager Manjeet Chhabra noted that optimism reigns in the Qatari business community throughout Q1 for 2012. Optimism has decreased slightly in the gas and non-hydrocarbon sectors when compared to the previous quarter. Chhabra stated that a tumultuous world economy is due to greater intensity in the European sovereign debt crisis and slowing growth around the world.

The economy of Qatar held strong through the 2008 and 2009 crisis, thanks to robust macroeconomic basics, and Chhabra expects healthy growth to continue. The non-oil industry dropped from 45 points to 40 in the composite index, as other sectors held steady scores. The first quarter of 2012 forecasts strong growth in the hydrocarbon sector.

The UN expects world gross product to grow by 2.6 percent in 2012 and a further 3.2 percent in 2013, growth rates lower than those levels seen prior to the crisis. Economic outlook in Qatar remains strong, partially because of the hydrocarbon exports comfortably set in contracts and long-term agreements. The hydrocarbon industry hit a peak growth level last year, with LNG production reaching 77mn tonnes per year. Real GDP for hydrocarbons will drop to 3 percent this year as a result of Qatari’s development moratorium extending to 2015 and restricting new hydrocarbon projects.

Qatar Financial Centre Authority’s director for Strategic Development, Asset Management & Banking Yousuf Al Jaida confirmed that Qatari businesses remain confident and optimistic. Al Jaida also stated that the business services industry remains strong and supports further opportunities in the nation and the region.

Bahrain Economy on the Path To Recovery

Recovery in the Bahraini economy is evident, according to forecasts from Standard Chartered Bank. Growth during the second quarter reached 1.1 percent, with a year-on-year growth rate of 2.4 percent in Q3.

Real GDP is expected to grow by 3.5 percent this year, up from the 1.9 percent growth seen last year. Robust oil product and a positive base effect will drive growth through 2012, while the non-oil sector reported contractions during Q3 of 2011, according to the SCB report.

Global research head and chief economist Gerard Lyons, along with research head for Europe, the Middle East, Africa and the Americas Marios Maratheftis, developed the Standard Chartered report.

Bahrain’s massive banking sector is the largest in the GCC based on economic factors. Assets of the nation’s retail banks total 300 percent of Bahrain’s GDP, with wholesale banking assets totalling 700 percent of Bahrain’s GDP. While wholesale banking experienced 14 percent contraction in the first quarter of 2011, it regained stability in the second and third quarters.

The five-year plan in Oman will support growth in the region and help the nation stay on track to reach diversification targets.

Infrastructure accounts for about 70 percent of the budgeted spending, with spending on social programs such as health care and education are also included.

The 2012 budget for Oman recorded an expenditure increase of 25 percent year-on-year.

Long-term growth will result from balancing the spending on higher wages with increased infrastructure spending, as per the five-year plan.

The Standard Chartered report also noted that Qatar will experience real economic growth in 2012, after hitting LNG output targets at the close of 2011. This high quality growth will come from activities in non-hydrocarbon sectors.

With global LNG consumption on the rise, Qatar’s export prospects continue to be bright, and LNG infrastructure should result in production of nearly 77mn tonnes per annum in the nation.

With Qatar set to host the 2022 FIFA World Cup economic activity in non-oil sectors is expected to pick up. Nearly $107 billion in projects are coming down the pipeline to prepare for the event, and a majority of those projects involve infrastructure. Transportation and accommodations will also see major investments. Twelve stadiums costing $4 billion are to be built.

Oil output in Saudi Arabia is expected to have jumped by 11 percent in 2011, moving from 8.28mn barrels per day in 2010 to 9.29mn bpd last year. Output in 2012 will drop down to 8.42mn bpd with Libyan output on the rise from 2010 levels of 0.45mn bpd.

Government spending is expected to drive growth throughout 2012, with $159bn in projects to be awarded this year by both the public and private sector. Infrastructure projects will account for the largest portion, along with construction of housing units.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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