By Andy Sambidge
Rating agency says Qatar will remain fastest growing; expects $100 oil next year
Economic growth in the Gulf Cooperation Council (GCC) will slow in 2013 owing to a moderation in oil production growth, according to a new report by Fitch Ratings.
However, the rating agency said high oil prices and production will continue to "provide a supportive backdrop for another year of solid non-oil growth".
The report said GCC economies will remain heavily influenced by global oil markets.
Fitch added that it expects Brent crude to average around $100 per barrel in 2013 despite the weak outlook for demand.
"As most GCC exporters aside from Saudi Arabia are operating at close to capacity, there is little scope to raise output after the hikes over 2011 and 2012," the Fitch report said.
Many governments in the region are expected to continue to use high oil revenues to stimulate their economies.
Fitch said it forecasts that Qatar will remain the fastest growing of all GCC sovereigns in 2013, driven by the government's huge capital investment programme.
It added that growth will also be strong where fiscal stimulus is combined with healthy rates of bank lending and buoyant consumer and business confidence, as is the case in Saudi Arabia and Oman.
Fitch said that higher government spending that helped growth bounce in the first half of this year in Bahrain was not sustainable and "political uncertainty will continue to cloud the outlook".
The agency added that a worsening political climate could also hit economic performance in Kuwait.
In the UAE, it said the non-oil economy "will pick-up owing to a renewed influx of businesses and residents".
For all GCC sovereigns apart from Bahrain, fiscal and current account surpluses are anticipated, further strengthening sovereign balance sheets and external positions, Fitch added.
The US fiscal cliff poses the largest short-term risk to the GCC economies, Fitch said, while a slowdown in China and an intensification of the eurozone crisis would also hurt the region, it added.
"In addition, the GCC remains vulnerable to swings in oil prices. Given the fiscal policy space in most of the GCC, Fitch anticipates that these risks should be manageable in 2013. The principal political risks are the possibility of conflict between Israel and Iran and an escalation of the unrest in Syria," the report said.