By Andy Sambidge
Bank Sarasin report also says it is 'cautious' over Dubai prospects following debt issues.
Rising oil prices will help economies in the GCC region to recover from the global downturn during the first half of 2010, new research from Bank Sarasin has said.
In its economic outlook, Global View, analysts at the Swiss bank said the major driver for GCC gross domestic product growth remains the evolution of the oil price, despite efforts by some GCC states to diversify their economies.
Sarasin expects oil prices to overshoot previous estimates of $75-85 per barrel in the first half of the year as the current global recovery fuels demand for oil.
However, in the second half of the year, Sarasin sees oil prices dropping slightly below the mentioned price band due to the global cooling towards the end of 2010.
"This in turn bodes well for the region in 1H10; but points to a slight downturn in 2H10," the report said.
"While the year 2008 conveyed the impression that there is no limit to GCC growth thanks to surging oil prices and GCC’s ambitious efforts to diversify from oil, the year 2009 brought two heavy dampeners for the region," it added.
"First oil prices temporarily fell to $35 per barrel and secondly Dubai World, the most prestigious project in the region, appeared to nearly default. 2010 will be not only a decisive year for the global economy, but in particular for the GCC."
Sarasin said its outlook for Dubai "is on the cautious side" but added that it is more optimistic for the region as whole.
"One has to keep in mind that Dubai only adds 10 percent to GCC’s gross domestic product, while the lion’s share of around 45 percent comes from Saudi Arabia," the report added.
Sarasin said macro and micro risks within GCC "may dampen investor’s risk appetite" for the region in 2010, adding it was cautious for emerging markets as a whole.
The bank said it thought the potential for stock markets in the GCC region was "limited" but a consolidation for equity markets in 2010 may set the stage for a more broad based and sustainable recovery in 2011.
Globally, the Sarasin report said the economic recovery would only turn into a sustained upswing in 2011, with the support of further fiscal stimulus.