DUBAI: The combined size of Gulf Arab economies will surge past $1 trillion this year on an oil price windfall, while non-oil sectors underpin real growth above 5 percent across the region, a Reuters poll showed yesterday.
The nominal GDP of Saudi Arabia, the United Arab Emirates and four other Gulf oil producers will mushroom by almost a third this year to $1.08 trillion from $821.1 billion in 2007, according to the poll of 14 economists. That reflects a more than tripling in nominal gross domestic product since 2002 in the world’s biggest oil-exporting region.
All Gulf state economies are set to grow by more than 5 percent in real terms this year as bumper revenues from a more than six-fold rise in oil prices since 2002 supports industry, construction and finance, median forecasts from the poll showed. “This is nothing short of a transformation of the region,” said Giyas Gokkent, head of research at National Bank of Abu Dhabi, who took part in the July 20-27 poll. “The catalyst of all the activities we are seeing around us, the seed is the energy boom.”
Growth in Saudi Arabia should accelerate to 5.8 percent this year from 3.4 percent last year as the world’s biggest oil exporter and OPEC’s largest producer ramps up output, the poll showed. At 11.6 percent, real growth will probably be fastest in Qatar, the world’s biggest exporter of liquefied natural gas, the poll showed. That compares with growth of 8.5 percent last year, while GDP is seen growing by 11.2 percent in 2009.
On its own, Saudi Arabia has boosted oil output since May to cool down oil prices as they scaled record levels above $140 a barrel this month. “The Gulf is bucking a global slowdown,” said Hany Genena, senior economist at Gulf Finance House. “The economies have been resilient because of high oil prices. They’ve settled domestic debt and accumulated reserves and have the power to weather shocks over the next three years.”
The Gulf’s total crude export revenues, including Qatar’s natural gas exports, will surge 65.3 percent to $660.1 billion this year — a near six-fold rise from $115 billion in 2002, economists said.
Wary of relying on an oil boom alone to support their economies, Gulf Arab governments have invested windfalls into economic diversification. Investment in real estate, finance and infrastructure is spurring growth in the UAE, where the second-largest Arab economy will probably expand 8.4 percent in 2008 before slowing to 7 percent next year, the poll showed. “Industrial growth will be the mainstay of overall expansion, as investment in manufacturing and heavy industrial projects brings new capacity on-stream,” said Economist Intelligence Unit economist David Butter. “The competitiveness of the UAE’s non-oil exports should also be bolstered by the weakness of the dollar.” Kuwait’s economy should expand 5.8 percent this year and 4.4 percent next year — compared with 4.6 percent growth in 2007 — but the economy is too reliant on crude revenues, economists said.
The world’s seventh-largest oil exporter said this year it would undertake a five-year plan to diversify away from oil by focusing on finance and attracting foreign investments.
All Gulf states, bar Kuwait, peg their currencies to the ailing dollar, which hit a record trough against the euro earlier this month, driving up import costs and stoking inflation to record and near-record peaks. A Reuters poll in May showed economists expect inflation to average at least 9 percent in five of the six Gulf states this year — the big cloud hanging over astounding regional growth.
Economists, meanwhile, expect economic growth to slow across the region in 2009, although remaining above 5 percent. Beyond 2009, the health of a US economy reeling from a credit crisis will play a role in the region’s growth, they said. Oman’s economy is forecast to expand 6.2 percent this year before growth slows to 5.5 percent in 2009, while Bahrain’s GDP will grow 6.5 percent this year before easing to 6.2 percent in 2009, the poll showed.
