Growth was thus mainly driven by public spending accompanied by a rebound in the dominant hydrocarbons sectors following the decline in crude oil output in 2009 when OPEC quotas were slashed. Despite these quotas still being in place, crude oil output in the GCC is estimated to have risen by 2.2 percent in 2010, while NGL output has jumped by 14 percent (see tables). Qatar's production of LNG has also surged. This combination of rising hydrocarbons output and stronger prices has led to a rebound in export earnings which have been reflected in higher current account and fiscal surpluses.

Although the global economy entered 2011 in a state of some uncertainty, the outlook for the GCC economies remains positive. Strong oil prices will sustain robust public spending and buoy confidence, while an easing of bank balance sheet strains, particularly in Saudi Arabia and Qatar, is expected to lead to a faster recycling of the region's large oil surpluses. Absent another credit crunch precipitated by a deepening of the crisis in the euro zone, capital flows into the region should also remain healthy. Thus although oil output gains may be constrained by OPEC policies, this will be offset by stronger nonoil growth as a revival in private sector credit and investment activity combines with sustained public spending. Overall the region's real GDP growth is expected to accelerate to 6 percent, the Samba report said.

Performances across the GCC will vary. The start up of new LNG and GTL production facilities in Qatar is expected to keep growth at around 16-17 percent in both 2010 and 2011. Meanwhile, increasing export earnings will be used to further the states diversification agenda, including infrastructure developments associated with hosting the 2022 World Cup, and lead to a strong revival in nonoil growth. Growth in Saudi Arabia will also be solid rising to 4.2 percent in 2011 from 3.8 percent in 2010. Public investment will continue to drive healthy nonoil growth, although the pace of spending is expected to ease as private confidence and investment hardens. While crude output gains could be constrained by OPEC decisions, rising NGL (up 18 percent) should be enough to keep the oil sector expanding at a modest pace.

Increased spending in the context of the government's $107 billion new five-year plan will help raise growth in Kuwait to 4 percent in 2011 from 2.5 percent in 2011, although bank balance sheet strains may still constrain private sector growth, the report said.

Oman is expected to grow by 5 percent bolstered by increasing oil output (Oman is not a member of OPEC) and infrastructure investment. Improving regional activity and abundant global liquidity should benefit Bahrain's' dominant financial sector helping push growth to 3.5 percent in 2011. Prospects in the UAE are more muted with strong public investment driven growth in Abu Dhabi being dampened by a slower recovery in debt laden Dubai and weak property prices. As a result real GDP growth in the UAE as a whole is likely to be contained at 3.3 percent in 2011.
 
Public finances

The Samba report said, after two years of strongly expansionary fiscal policies aimed at mitigating the affects of the global crisis, the rate of increase in spending will likely moderate in 2011 as GCC governments seek to unwind exceptional fiscal stimulus and return spending growth to more sustainable levels. That said, public spending will continue to be driven by long-term spending plans and will remain the key driver of growth in 2011. These plans remain affordable in the context of projected oil prices around $85 barrels and large external savings, and GCC public finances will remain reassuringly strong. All except Bahrain are expected to post fiscal surpluses despite the large increase in budget break even oil prices that has occurred over the past few years as GCC spending commitments have risen. That said, GCC governments are conscious of their over reliance on oil revenues and the long discussed introduction of value-added tax (VAT) could take place by 2012.

The GCC consolidated fiscal balance is now estimated to have recorded a deficit of 3.2 percent of GDP in 2009, principally reflecting revised data for the consolidated UAE fiscal accounts and the Saudi budget which show deficits of 12.2 and 6.1 percent of GDP respectively. This reflects the large amount of public spending during the year to support banks and state owned enterprises as well as expansionary fiscal policies. In the case of the UAE there are also some presentational issues as the deficit is financed principally from Abu Dhabi's oil company profits, as well as a drawdown in external assets.

With oil prices up an estimated 28.2 percent in 2010, GCC fiscal balances have since strengthened despite still high spending, although Dubai's finances remain strained. Recent official data suggest that the dominant Saudi fiscal balance returned to a surplus of 6.7percent in 2010. The UAE is likely to have posted another small deficit, but overall the GCC fiscal balance is estimated to return to a surplus of 5.4 percent of GDP in 2010. This is expected to rise further to nearly 7 percent in 2011 as oil prices strengthen further. A stronger improvement will be precluded by the large multi-year infrastructure and development spending commitments by various GCC states, including Saudi Arabia's $400 billion five-year (2010-14) public investment program, Kuwait's $107 billion development plan, and Oman's $78 billion development plan through 2015, the report added.

GCC oil export earning rebounded strongly in 2010 driven by higher prices and an increase in production. While imports are also picking up as public sector investment programs are implemented, GCC external balances have improved and will continue to do so in 2011 as oil prices strengthen further. The current account surplus for the GCC as a whole is expected to rise to between $120-$140 billion (around 12 percent of GDP) in 2010-11. Although still considerably lower than the $200 billion plus surpluses achieved in 2006-08, this will allow for a further build up in external assets boosting confidence and providing additional income revenues, the Samba report said.