Source: Emirates 24|7
GCC will record high growth but other Arab economies remain uncertain
The UAE’s real economy expanded by around 3.2 per cent in 2011 mainly because of higher oil prices and production and is projected to pick up by about 3.5 per cent in 2012, according to a UN group.
The other members of the six-nation Gulf Cooperation Council (GCC) are also expected to record strong GDP performance through 2012 in contrast with other Arab nations which have been hit by political unrest, the UN Economic and Social Commission for Western Asia (Escwa) said in a report.
It showed real GDP growth in the GCC increased to 5.7 per cent in 2011 from 4.4 per cent in 2010 and is projected at 4.6 per cent in 2012.
In the other Arab countries, mainly oil importers, real GDP slowed down from 5.7 per cent in 2010 to 2.3 per cent in 2011 and could rebound to 2.6 per cent this year. Excluding Iraq, which is recording strong performance, the combined growth in the non-GCC countries stood at 0.7 per cent in 2011 and is projected at around 0.8 per cent in 2012, said Escwa which groups most Arab nations.
“After the pessimism that prevailed in 2008 and 2009, the economic outlook of the Escwa region improved in 2010. However, uncertainty returned in 2011 as social movements spread across the Arab world,” it said.
“Political unrest has had direct adverse effects on economic activity in Bahrain, Egypt, Syria and Yemen, and negative spillover effects on neighbouring countries, particularly Jordan and Lebanon. Political unrest contributed to higher oil prices which boosted growth rates in oil-exporting countries.”
The report showed growth in the Escwa region is estimated to have increased from 4.7 per cent in 2010 to 4.8 per cent in 2011.
Growth was especially high in several oil-exporting countries, reflecting high crude prices that averaged $107 a barrel.
But it added that political unrest reduced growth rates in the more diversified economies (MDEs), particularly Syria and Yemen where growth rates are estimated to have contracted by two per cent in 2011.
“In 2011, GCC countries benefited from high oil prices and grew by an estimated 5.7 per cent, up from 4.4 per cent in 2010.”
The report noted that the UAE, Kuwait and Saudi Arabia increased oil production to compensate for the disruption of oil production in Libya during the war.
“The economic performance of those countries was not significantly impacted by social movements because high oil prices enabled them to maintain fiscal expansion and support household income and private consumption,” it said.
“This was not the case in Bahrain, where the social unrest of 2011 tarnished the country’s reputation as a stable financial hub and key financial and tourism sectors suffered causing economic growth to drop from about 4.5 per cent in 2010 to around 2.5 per cent in 2011.”
The report said growth in GCC countries is mainly driven by the oil sector, but added that the non-hydrocarbon sector is increasingly contributing to growth.
In Saudi Arabia, the non-oil sector is estimated to have grown by five per cent in 2011, which is one of the highest growth rates in decades.
This growth rate is expected to remain at five per cent in 2012 supported by high public spending and investment and increased private consumption, it said.
“As for 2012, the outlook for the Escwa region is extremely uncertain, as the situation in Syria is expected to remain highly volatile and political uncertainty is still characterizing the transitional phase in Egypt and Yemen,” Escwa said.
“The region is vulnerable to a global downturn which could affect oil prices and reduce demand for non-oil exports. Oil-exporting countries will drive growth as crude prices are expected to remain high at around $100 a barrel.”
A breakdown for Escwa’s 14 Arab members showed real GDP growth is forecast at 4.5 per cent in Saudi Arabia, seven per cent in Qatar, four per cent in Oman, and 3.5 per cent in both Kuwait and Bahrain.
Outside the GCC, it was estimated at 10.5 per cent in Iraq, five per cent in Palestine, 3.2 per cent in Jordan, 2.5 per cent in Lebanon, 1.6 per cent in Egypt and one per cent in Yemen. The report projected zero growth in Sudan and a 5.5 per cent contraction in conflict-battered Syria.