DAMMAM: Economists have predicted that the growth in Gulf Cooperation Council (GCC) states will decline to three percent in 2009 as a result of falling oil prices and the difficulty of getting credit which is the driving force behind private sector investment.
“The year 2009 will be a difficult year for GCC economies and will be a major test for them to prove their ability to deal with crises,” the economists told Arab News. “An economic slowdown in GCC countries in 2009 is inevitable,” they stressed. The economists said the slowdown would pressure lawmakers to adopt more flexible rules and regulations in order to attract both domestic and foreign investment. The GCC states should also focus on diversifying revenues.
Essam Abdullah Fakhro, chairman of the Federation of GCC Chambers, said the global economic crisis demanded joint efforts by public and private sectors to offset the impact. “The private sector will determine the future of GCC economies,” he added. He said the private sector has been playing a significant role in strengthening GCC economies by carrying out development projects set by governments’ five-year plans. Government spending has fallen from 34.4 percent of the gross domestic product (GDP) in 2002 to 29.4 percent in 2008, he said. “The private sector has the ability to create new and diversified investment opportunities. It can also acclimatize to new regional and international economic developments.”
Salman Al-Jeshi, a member of Asharqiya Chamber’s board of directors, emphasized the importance of GCC states giving preference to revenue diversification and cutting their dependence on oil revenues. “Such a move is essential in order to counter the current global financial crisis,” he pointed out. Al-Jeshi urged GCC banks to continue extending credit to private companies in order to boost investments. “Saudi banks did not depend on foreign credit to finance domestic business operations. This is one of the facts that helped the Kingdom reduce the impact of the global crisis.”
Saad Al-Ayed Al-Hassousa, CEO of Arbah Capital in Dammam, attributed the main reason for the current economic slowdown in the region to the difficulty in receiving credit. “The conditions set by banks for giving loans to companies have become complicated. The domestic banks charge the same interest rate, even after the central banks have cut their rates.” He said the global crisis would have less impact on Saudi Arabia than on other GCC states.
Al-Hassousa said the fall in revenues from oil exports would cut government expenditures considerably. “The crisis will affect not only the oil and petrochemical sectors but also the non-oil sectors including food and building products. 2009 will be a difficult year for GCC economies and the situation will not be the same as in the previous six years.”
