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Tue 26 Jan 2010 06:03 PM

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Qatar seen leading Gulf growth in 2010 - poll

Analysts predict recovery but highlight impact of Dubai debt on UAE outlook.

Most Gulf Arab states will enjoy higher growth rates this year than previously expected, helped by global recovery, but debt woes in the UAE will weigh on the outlook, a Reuters poll showed on Tuesday.

The global financial crisis trimmed output and froze credit in the world's top oil exporting region last year, sending some of the key players such as the UAE into a downturn. But global recovery is seen helping revive investment and credit growth.

Qatar will remain the region's leader with a 16.1 percent jump in gross domestic product this year thanks to massive expansion of its natural gas facilities, according to the median forecast of economists polled between January 14-25.

The previous Reuters poll in November forecast the economy of the world's largest gas exporter would grow by 12.5 percent this year.

The latest poll was based on responses from 20 analysts.

Saudi Arabia, the largest Arab economy and the world's top oil exporter, is expected to grow by 3.8 percent this year, well up from an anaemic 0.2 percent in 2009 as state spending remains high and private consumption picks up.

"In terms of real GDP, the region will do better than the US and Europe but ... it will lag Asian growth," said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh.

"But the region is not going to witness robust growth: it is going to be a gradual recovery because the global recovery will be a long recovery and a gradual recovery," he said.

OPEC-member Kuwait should emerge from a downturn this year, growing by 3.4 percent, a slightly faster pace than Bahrain, while Oman should see GDP growth of 4.0 percent in 2010.

However, the growth prospects of the UAE - the second largest economy in the Arab world - have deteriorated due to the impact of debt restructuring in Dubai's flagship companies.

The UAE is seen growing 2.5 percent this year, the slowest pace in the Gulf, down from a November forecast of 2.9 percent. But the world's third largest oil exporter would still improve from an estimated contraction of 1.4 percent in 2009.

Dubai rattled global markets in November when it sought a debt delay on $26 billion linked to its flagship conglomerate, Dubai World. The UAE central bank and Abu Dhabi lent an overall $20 billion to Dubai last year to help its neighbour restructure debts.

All ten analysts that answered the question said Abu Dhabi was likely or very likely to step in again to help Dubai. Six believed a default of a Dubai government-linked company was unlikely or very unlikely in 2010 with the remaining four saying it was likely.

"If any of Dubai government-owned entities defaults on their obligations that would also cast a dark shadow on Abu Dhabi," said Farah Ahmed Hersi, senior economist at Masraf Al Rayan in Doha. "After all there is no state called Dubai but the state called the United Arab Emirates."

The poll also showed the market estimating Dubai's debt pile including the state-owned companies at $101.3 billion, up from $80 billion officially reported last year.

Inflation was seen staying well below 2008 record peaks this year across the Gulf after some countries such as the UAE and Qatar experienced falling prices in 2009 due to sluggish household demand, weak credit growth and lower rents.

"There is nothing on the radar that inflation is going to be a problem in 2010 even in the Gulf, where there has been quite a significant amount of public spending," said James Reeve, senior economist at Samba Financial Group in London.

Saudi Arabia should see the highest inflation of 4.4 percent in 2010, while the UAE was likely to have the lowest consumer price growth at 2.5 percent, well below over 10 percent seen in most Gulf countries in 2008.

Oil prices, which more than doubled over the past year, were likely to improve Gulf fiscal balances in 2010, allowing the governments to sustain large stimulus packages unlike in other parts of the world. (Reuters)

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