JEDDAH: Slowing corporate earnings growth in major Gulf economies is an issue for the region’s stock markets, which may have to get used to more modest rates of profit expansion in coming months.

Over the past two years, corporate profits in the Gulf have risen as economies have recovered from the global financial crisis, which triggered property market crashes and a string of debt restructurings in the region.

The recovery has been particularly helpful to real estate developers, which benefited from a snap-back in property markets, and banks, which were able to cut new provisions for bad debt. This boosted stock markets sharply.

But second-quarter earnings forecasts by analysts surveyed by Thomson Reuters suggest the earnings boost provided by the economic recovery is fading. The recovery is almost complete, so profits will grow at more normal rates — rates which may no longer compare favorably with many other markets in the world.

Companies in Saudi Arabia and Qatar are starting to announce second-quarter earnings and they will be followed in the next few weeks by firms from the UAE.

The analysts’ forecasts indicate Dubai will again enjoy the fastest earnings growth among major Gulf economies for the second quarter of this year, but the rate will slow sharply.

The combined net profit of 12 major listed firms in Dubai’s main stock index is expected to rise 22 percent year-on-year for the second quarter, after surging 38 percent in the first quarter.

Emaar Properties, Dubai’s largest listed company by market capitalization, accounts for much of the expected slowdown. Analysts expect the firm’s profit to grow 18 percent in the second quarter after surging 55 percent in the first.

This is not because of any weakening of Emaar’s business outlook; it is simply that most of the company’s recovery from Dubai’s property market crash has now been completed, so growth will become more normal. Last year, Emaar said its property sales had quadrupled in the first half of 2013.

Analysts also expect slower growth at other property-related companies. They forecast builder Arabtec’s profit will rise 36 percent in the second quarter after a 121 percent jump in the first quarter.

Overall, analysts think the corporate earnings growth of major Dubai companies will moderate to 18 percent this year from 24 percent in 2013 and 23 percent in 2012.

The Dubai stock index is up 37 percent year-to-date, but after a slide caused in part by management turmoil at Arabtec, it is 15 percent below the multi-year peak hit in May. The earnings outlook suggests it may be hard for the market to surpass that peak in coming months.

Combined earnings growth of 47 major companies on Saudi Arabia’s bourse is actually expected to accelerate in the second quarter, to 10 percent — the region’s second-highest rate — from 7 percent in the first quarter.

But that is due to improvement in the petrochemical sector, a globally focused industry, rather than domestic sectors such as banking and retailing.

Petrochemical giant Saudi Basic Industries (SABIC) is expected to boost its second-quarter profit by 10 percent, after a 2 percent drop in the first quarter. SABIC’s unit Saudi Kayan is likely to report its fourth profitable quarter in a row, and other firms in the sector should do well.

“The petrochemicals sector’s earnings are expected to grow year-on-year, supported by higher volumes from the anticipated increase in operating rates, lower duration of shutdowns and increased petrochemical prices,” Saudi Arabia’s NCB Capital said in a recent report.

Combined profits at 10 Saudi banks, on the other hand, are expected to grow just 4 percent, partly because of Al-Rajhi, the country’s biggest listed lender, whose profit is forecast to fall 8 percent after a 16 percent drop in the first quarter because of a surge in bad loan provisions.