ABU DHABI, 11 March — Gulf economies are heading toward a third year of real growth in 2002 but their oil sector will recede by more than $10 billion and some members are reeling under heavy domestic debt, according to estimates released by the Arab Monetary Fund.
Fiscal reforms prompted mainly by volatile oil sales and persistent financial imbalances have also started to pay off, with inflation remaining below 3 percent in some members and as low as 0.5 percent in others.
Forecasts show GCC’s combined GDP will grow by around 2.9 percent in real terms this year compared with 3.5 percent in 2000 and as high as 6 percent in 2000.
Oman and Bahrain will record 3.5 percent growth each while Kuwait’s economy will be up by 2.3 percent and Saudi Arabia’s by 2.2 percent, Gulf News daily said yesterday quoting the fund report.
It gave no figures for the UAE and Qatar but economists in the region expect their GDP to grow by 2.6 and 3.6 percent respectively.
In nominal terms, most GCC economies are projected to slide this year due to lower oil prices as crude exports form more than a third of GDP.
According to projections by London-based Center for Global Energy Studies, owned by former Saudi Oil Minister Ahmad Zaki Yamani, lower crude prices will depress GCC’s income this year to around $90 billion from $102 billion in 2001 and $127 billion in 2000.
“There will be real economic growth in Saudi Arabia and other GCC countries this year but in nominal terms, we expect a decline,” said Malik Younus, an economist at Saudi Arabia’s National Commercial Bank.
“This is mainly due to lower oil prices as was the case in 2001, when their economies grew in real terms but recorded nominal declines.”
Sharp oil price fluctuations have combined with swelling defense expenditure over the past decade to motivate GCC governments into embarking on reforms to expand the role of the private sector, whose vast wealth is accumulated abroad because of the lack of major investment opportunities at home.
A surge in oil prices in 2000 pushed the GCC’s GDP to nearly $321 billion, its highest level in current prices since the end of the oil boom in early 1980s. In nominal terms, their economies galloped by more than 15 percent.
AMF figures showed UAE’s GDP peaked at $66.1 billion in 2000 while it soared to $173.2 billion in Saudi Arabia, $37.8 billion in Kuwait, $19.7 billion in Oman, $16.5 billion in Qatar and $7.9 billion in Bahrain.
In 2001, combined GDP shrank to around $310 billion in current prices and is projected to slip by another $10 billion this year.
Despite forecasts of an oil price decline this year, most members have maintained relatively high spending to avoid a sharp economic slowdown.
But heavy debt servicing is eating into the budgets of some members, mainly Saudi Arabia, which is paying more than $4 billion a year in servicing for its debt of nearly $170 billion, owed mostly to local banks.
But AMF said it saw an improvement in other fiscal fields in Saudi Arabia, with inflation cut to 0.5 percent last year and is projected to be maintained this year.
Inflation was forecast at around 1.1 percent in Oman, 1.5 percent in Bahrain and 2.4 percent in Kuwait. Bankers expect inflation in the UAE and Qatar to be as low as 1.5 percent this year.
