GCC economy put at $1.6trn in 2013

The economies of Gulf hydrocarbon producers will grow by around eight per cent to peak at nearly $1.6 trillion in current prices this year while real growth is projected at about 3.6 per cent, according to regional forecasts. Real GDP growth this year, despite global uncertainty, will be a result of strong oil prices and high public spending, which will spur growth in many sectors and encourage the private sector to pump more investment, said the report by the Dammam-based Federation of GCC chambers of commerce and industry. In its semi-annual report released on Sunday, the federation said any fresh Western financial crisis would have limited effects on the economic and financial system in the six-nation Gulf Cooperation Council on the grounds the regional economy has fully recovered and banks have a strong capital and liquidity base. "GCC real GDP is expected to grow by 3.6 per cent in 2013 against 5.5 per cent in 2012 despite fears of fresh economic and financial upheavals worldwide," the report said. It expected actual public spending in the GCC to rise by 14 per cent this year adding that this will spur further private sector investment and boost non-oil growth. The growth will widen inflation to around 3.5 per cent from 3.2 per cent in 2012, it said. Citing estimates by the Washington-based Institute for International Finance (IIF), the report said oil prices would average as high as $113 a barrel in 2013 and that this would again allow the GCC countries to record large current account and fiscal surpluses. "According to IIF projections, the combined GCC economy will reach $1.6 trillion in current prices this year, an increase of eight per cent over 2012," it said. The report estimated the GCC's combined exports of goods and services to slightly fall to around $832 billion in 2013 from a record high of $850 billion in 2012 but imports will likely swell to $590 billion from $578 billion, indicating a business upturn in the six members which control over 40 per cent of the world's oil wealth. "These indicators show that the financial and economic situation in the GCC countries have remained strong following the massive financial assets built by member states over the past few years," the report said. It noted such conditions have also positively affected the GCC stock markets, where dealings leaped by about 65 per cent to $584 billion in 2012. GCC banks also performed better as their net income grew by 10 per cent to $23.2 billion last year. "GCC banks are expected to record boom in 2013 for the second year running as many of them are expected to benefit from financing large projects announced by the GCC governments for this year," the report said. The report urged GCC governments to adopt what it described as more "growth-stimulant" policies to ensure balance in the economy by securing liquidity for private sector projects and focusing more on job-creation and productive ventures. "Such policies are also needed to support economic diversification programmes, push ahead with labour market reforms and curb corruption," it said. The report noted that GCC states UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman have assumed an oil price of $70-80 for their 2013 budgets although there are expectations prices could average $113 a barrel. "This means that the budgets of the GCC countries could record a combined surplus of around $65 billion this year." The report said GCC states also need to intensify efforts to better manage public funds and strengthen their institutions, adding that efforts are also needed to ensure jobs for all citizens while at the same time saving part of the funds for the future generations. "Many GCC countries have set up funds to exploit excess money for the future generations these funds have drawn global attention recently in a bid to improve transparency and better manage their funds," it said. "GCC also need to keep up supervision of their banks to ensure they remain strong given their vital role in economic development governments should step up their support for these banks to bolster their capital base so they will be capable of facing any financial problem in the future."