Gulf economic growth set to slow

GLOBAL DOWNTURN: Merrill Lynch said GDP growth in the Gulf is set to slow this year and next. (Getty Images)

Economic growth in the Gulf is expected to slow this year and next due to the impact of the global economic downturn, Merrill Lynch said on Tuesday.

The US bank said in report on the Gulf Cooperation Council (GCC) it has lowed growth forecasts for the UAE, Saudi Arabia, Qatar and Kuwait and that GDP growth for the region as a whole is expected to slow to 4.5 percent in 2009 from 6.2 percent this year.

Merrill Lynch said GCC countries are in a good positioned to deal with the global downturn, "but the net impact will still be lower growth and smaller surpluses".

Merrill Lynch said the global downturn will hit the UAE the hardest due to its exposure to tourism and trade, cutting its GDP growth forecast for this year to 6.8 percent from 7.2 percent and 2009 forecast to 4.5 percent from 6.8 percent.

The bank cut its growth forecast for Saudi Arabia, the region's largest economy, to 4 percent for 2009 from 4.8 percent due to lower oil production. It said the kingdom's large and closed domestic market provides some protection against the global downturn and is a source of stable growth.

Qatar had its 2008 growth forecast cut to 14.5 percent from 14.8 percent by Merrill Lynch and its 2009 growth forecast slashed to 9.5 percent from 12.8 percent. The bank said the lack of a large domestic market in Qatar makes it more exposed to the global downturn.

The bank kept its 2008 growth forecast for Kuwait unchanged, but cut its forecast for next year to 4.2 percent from 6.2 percent. It said the government is likely to use its massive budget and current account surpluses to support the domestic economy and equity markets.

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