MANAMA: GCC countries had a significant pipeline of investments, measured at $2.2 trillion at the end of last September, a report released yesterday said.
Securities and Investment Company (Sico) in its GCC investment outlook to be presented at the upcoming Fund Forum in Bahrain claimed that roughly $500 billion worth of projects are already underway although part of the planned investment may be postponed or canceled. Sico viewed this as positive for the region as it will help to reduce inflationary stress.
The GCC is due for substantial further short-term pressure on its financial markets but the outlook for its medium and long-term growth is positive, underpinned by strong macroeconomic fundamentals. “The GCC has witnessed ample evidence over the past five months that its financial markets and economies are very much a part of the global economy,” said Anthony Mallis, Sico chief executive officer.
“However, we believe that although the region may yet experience further pressure, even pain, in the short term, the medium to long-term growth story remains robust. The economic structure of the region is fundamentally different to those of developed and other emerging markets.
“Although oil prices have fallen by over $100 a barrel over the past four months, with prices hovering at around $45-$60 a barrel, even so we believe that GCC economies have sufficient cushions to sustain economic growth, albeit constrained until the world economy picks up. With increasing revenues from the non-oil sectors, together with the wealth generated by sovereign investments, the region’s economies are set for continued strong but moderating growth.”
Sico has developed market-leading investment insight since its inception 13 years ago by offering clients proprietary research-based advice. With this deep understanding for GCC regional investment opportunities, the company has developed an investment business consistently delivering strong growth and value for its clients.
At Fund Forum, Middle East, Sico will outline its views on the main factors that will affect economic growth across the GCC. The US Fed is very unlikely to raise rates in the near future, meaning that regional real interest rates will remain in negative territory as they remain pegged to the US dollar. Conversely, liquidity has tightened and is impacting the wider GCC economy with the cost of lending having substantially increased. Sico believes this to be positive for the economy over the medium term as constrained credit growth will help to cool regional economies, contributing to reducing inflationary pressures.
Inflation, fuelled by both supply and demand factors, has been a key and troubling issue for the region for the past five years. Sico believes that the recent decline in commodity prices, the strengthening of the US dollar and increases in interbank rates should help ease inflationary pressures. The region will continue to experience fiscal and current-account surpluses, although reducing from present levels and derived from the previous five years’ oil revenue windfalls (and foreseeable modest oil prices) which enabled GCC economies to build foreign-exchange reserves, reduce government debt levels and invest in long-term projects to help diversify their economies.
