GCC projected to see 7% economic growth in 2011

Oil-exporting countries in the Middle East will see economic growth of 4.9 percent this year, driven by economic recovery in the Gulf, the International Monetary Fund said on Wednesday. It said countries, including the UAE, Saudi Arabia, Kuwait, Oman, Qatar and Bahrain, would see a mild pickup in growth in 2011 on the back of higher oil prices, while the oil-importers would experience a dramatic slowdown. This expansion will be driven by the high level of activity in the countries of the Gulf Cooperation Council (GCC), where growth is projected at 7 percent in 2011, the IMF said. The IMF’s Regional Economic Outlook for the Middle East and Central Asia, projects overall growth in the Middle East and North Africa region, including Afghanistan and Pakistan, at 3.9 percent in 2011, down from 4.4 percent in 2010. Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, said: “Since the beginning of this year, a deterioration in the international economic outlook and the buildup of domestic social pressures have resulted in an economic slowdown in many of the region’s oil-importing countries. "But we should not lose sight that the ongoing historical transformation holds the promise of improved living standards and a more prosperous future for the people in the region.” Economic activity in the region’s oil-exporting countries has clearly improved, bolstered by continued high energy prices, the IMF added. The IMF said that several countries - Saudi Arabia in particular - have stepped up oil production temporarily in response to higher oil prices and shortfalls in production from Libya. Increased oil revenues have created additional room for government spending in the GCC, Ahmed said, adding that several countries had announced spending programmes covering a wide spectrum of measures, such as subsidies, wages, and capital expenditure. At current projected oil prices and levels of production, revenue gains will more than offset the high levels of public spending. In 2011, the oil exporters’ combined external current account balance is expected to increase from $202bn to $334bn (excluding Libya), and from $163bn to $279bn for the GCC. The report said it saw a continued gradual recovery in GCC banks, which had capital adequacy ratios in excess of 15 percent and nonperforming loans below 10 percent. But private sector credit growth remains cautious, it added. Looking ahead, the IMF’s assessment predicts a moderation in growth for the region’s oil exporters to about 4 percent in 2012. “Undoubtedly, the year ahead will be challenging for many countries, with continued political uncertainty, a deteriorating global economic outlook, and higher financing costs impeding a quick economic recovery," said Ahmed. "Measures aimed at restoring confidence and fostering more inclusive growth will help countries enhance activity and ultimately address the needs of the population,” he added.