JEDDAH, 14 August 2007 — After a robust performance by the Gulf Cooperation Council (GCC) economies in 2005 and in 2006, real gross domestic product (GDP) for the region is forecast to grow at a rate of five percent this year. The GCC economies grew by 6.8 percent in 2005 and about six percent last year. According to a monthly newsletter for July by the Al-Rajhi Bank, the GCC economies more than doubled in nominal terms to some $723 billion between 2001 and 2006.
Saudi Arabia’s economy has experienced a strong growth since 2003 and surged ahead with its nominal GDP estimated to have grown by 12.4 percent in 2006 to SR1.30 trillion ($347.9 billion) on the back of sustained high levels of oil revenue, while the real growth rate for 2006 was 4.6 percent.
The newsletter said the United Arab Emirates (UAE) is expected to have recorded the highest real GDP growth in 2006 at 9.7 percent, followed by Qatar 8.8 percent, Bahrain 7.7 percent, Oman 5.9 percent and Kuwait 5 percent. The UAE is set to continue to lead in terms of growth this year rising by 8.2 percent, followed by Qatar 8 percent, Bahrain 6.9 percent, Oman 6 percent, Saudi Arabia 4.8 percent, and Kuwait 3.5 percent.
“While the economies of the region will remain sensitive to adverse regional geopolitical developments and uncertainties, they are, nevertheless, expected to maintain the current uptrend for several years to come, supported by the positive outlook for the world oil market, and a more confident and efficient private sector,” the Al-Rajhi report said.
Annual inflation in Qatar last year reached the highest level of 11.8 percent, followed by UAE 10.1 percent, Oman 3.2 percent, Kuwait & Bahrain 3 percent each, and Saudi Arabia 2.2 percent.
In May, the money supply, M1 declined at a monthly rate of —0.5 percent to SR329.7 billion, while M2 and M3 rose at monthly rates of 1.2 percent and 0.3 percent to SR578.8 billion and SR694.2 billion, respectively. Over the past 12-month period, ending May this year, the money supply (M1, M2 and M3) surged by 11 percent, 18.4 percent and 17.9 percent, respectively, reflecting continuing monetary growth at rates aimed at sustaining the projected high economic growth.
The report said that Saudi bank deposits stood at SR628.3 billion in May compared to SR626.7 billion in April, recording a monthly increase of 0.3 percent and an yearly increase of 19.4 percent. The total value of Saudi commercial bank credit stood at SR520.5 billion in May compared to SR511.2 billion in April, recording a monthly rise of 1.8 percent and a yearly rise of 11.1 percent. The short-term, medium-term and long-term credits surged at monthly rates of 2.2 percent, 2.8 percent and 0.7 percent to SR295.8 billion, SR71.5 billion and SR153.2 billion, respectively. Over a 12-month period, ending May, the short-term credits grew at 16.6 percent and medium-term credits at 20 percent, while the long-term credit fell at a rate of —1.4 percent. In May, about SR484.9 billion, representing 93.2 percent of total credit, was extended to the private sector and the rest SR35.6 billion or 6.8 percent to the public sector.
The annual inflation rates in 2007 are forecast at 10 percent for Qatar, 6.2 percent for UAE, 3.8 percent for Oman, 3 percent for Bahrain, and 2.8 percent each for Kuwait and Saudi Arabia.
The newsletter said Qatar and the UAE have experienced the highest inflation rates in the Gulf, particularly in the housing sector. The average accommodation rentals increased by a total of 83 percent in Doha over the last two years and by 60 percent in Dubai, compared to just 21 percent in Riyadh.
Moreover, rent as a proportion of total household income has reached 33 percent in Qatar and 30 percent in the UAE, compared to 19 percent in Saudi Arabia. Inflation in the region now ranges between 2 percent and 12 percent, where UAE and Qatar have the more pronounced inflationary pressures; elsewhere inflation has been more moderate. According to the report, inflation in the GCC countries is largely driven by higher spending by the government as well as private sector, and demand/supply imbalances.
The newsletter added that the world’s three major currencies were up against the Saudi riyal, where the GBP (pound sterling) appreciated by 3.24 percent, the EUR (euros) 2.97 percent and the JPY (Japanese yen) 1.21 percent during one month from June 15 to July 15, reflecting the movement of the dollar to which the riyal is pegged.
