KUWAIT CITY, 14 June 2006 — The Gulf countries, which boasted strong growth in the past three years thanks to record oil prices, are forecast to show another year of robust growth in 2006, despite a painful correction in the stock markets.
Gross domestic product (GDP) of the six-nation Gulf Cooperation Council (GCC) showed a real annual growth of just 2.5 percent on average between 1998-2002 when oil prices dropped sharply. But real GDP grew strongly by 8.5 percent, 5.9 percent and 6.8 percent in 2003, 2004 and 2005, respectively and is forecast to grow by a healthy 6.4 percent in the current year, according to the International Monetary Fund.
The GCC groups energy-rich Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) and which together pump around 16 million barrels of oil daily in addition to large quantities of natural gas.
Nominal GDP of the six countries grew from $404.6 billion in 2003 to $475.1 billion in 2004 and a mammoth $597.2 billion last year, recording nominal growth rates of 29.8 percent, 17.4 percent and 25.7 percent, respectively.
The high growth rates were attributed to a sharp rise in oil prices which shot from an average of $35 a barrel in 2004 to $53 a barrel last year and is expected to be in the 60s for the current year, IMF said.
The GCC states are estimated to have posted around $300 billion in oil revenues last year and the figure is expected to rise further in 2006 as oil prices remained strong. All the six nations have recorded huge surpluses in 2005, especially Saudi Arabia, Kuwait, UAE and Qatar.
Real oil growth registered 17.2 percent in Saudi Arabia in 2003, compared to just 2.2 percent last year. It is forecast to grow by 2.6 percent in 2006. In other GCC states, real oil GDP in 2005 grew by 11.3 percent in Kuwait, 3.4 percent in Qatar and 8.4 percent in UAE.
Economists in the region have raised fears that the huge surpluses could delay necessary economic reforms needed to rectify structural ills in Gulf economies that have remained largely dependant on oil price fluctuations.
Real non-oil economic growth registered 8.6 percent in Saudi Arabia in 2005, compared to 8.3 percent in Qatar, 6.8 percent in Kuwait and 7.8 percent in UAE. They are forecast to post higher growth rates this year.
Saudi Arabia, the largest economy in the Arab world, saw its nominal GDP grow from $214.9 billion in 2003 to $307.8 billion two years later. It is forecast to hit $346.3 billion in 2006.
Riyadh used its surplus to pay part of its huge public debt, mostly domestic while other states have used the surplus to increase their asset formations.
Saudi government debt which was 82 percent of GDP in 2003, dropped to 65 percent in 2004 and to just 46.5 percent last year. IMF expects it to drop to 27.1 percent, or $94 billion, by the end of this year.
Kuwait has seen its foreign assets grow to well over $150 billion, up from $60 billion about 10 years ago. The emirate posted around $23 billion of budget surplus in 2005/2006 fiscal year, the largest ever.
