GCC economies are set to grow by an average of 6.5 percent this year, up from 5.1 percent last year, the Washington-based Institute of International Finance has said in a new report.
It said the rise would be buoyed by higher oil production and large increases in government spending, with Qatar seeing the highest level of growth at 18.1 percent.
Analysts also said higher oil prices – up from $80 per barrel in 2010 to $115 in 2011 – and production levels would help lift the GCC’s budget revenues from hydrocarbon exports from $362 billion in 2010 to $533 billion in 2011.
“This surge in revenues far exceeds the increases in government spending and underlies the widening of the consolidated fiscal surplus from eight percent of GDP in 2010 to 13.2 percent in 2011,” the report said.
The IIF added that the combined external current account surplus of the GCC was projected to rise from $129 billion in 2010 to $292 billion this year.
“Consequently, gross foreign assets of the GCC countries in 2011 are projected to rise to $1.7 trillion (against foreign liabilities of $0.5 trillion) and of the Arab countries to $2.2 trillion (against total foreign liabilities of $0.7 trillion),” the IIF said.
The report said that despite the turmoil in the Middle East and North Africa region, it did not expect to see “significant shifts” in funds being managed by sovereign wealth funds (SWFs), which currently handles more than a third of total funds.
“While the new order in the region could bring about more open, inclusive, and accountable governments, the achievement of stable democracies with robust and effective institutions will require fundamental political and economic reforms and will take time,” the IIF added.
“In the oil-importing countries, the economic toll from the political turmoil will translate into a sharp drop in growth rates in 2011, with a likely rebound in 2012,” analysts said.
For the countries directly affected by the turmoil, it expects real GDP growth to slump from an average of 4.4 percent in 2010 to -0.5 percent in 2011.
“Furthermore, inflationary pressures are expected to rise, and current accounts to weaken, while some countries will see the erosion of reserves and
pressures on their currencies. Nonetheless, these countries are buffered by adequate reserves and therefore not expected to suffer serious external vulnerabilities, although the risks will remain on the downside,” the Institute said.
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