JEDDAH: Higher crude prices and output will likely boost the combined nominal GDP of Gulf oil producers to a record high of more than $1.1 trillion in 2011, a report by Emirates Industrial Bank said.
However, the economic growth and public spending by the GCC countries could also trigger fresh inflation fears next year.
It said that the Gulf, which controls over 40 percent of the world’s proven oil wealth, boosted public expenditure by nearly 6 percent through 2010 as part of ongoing fiscal expansion measures to counter the repercussions of the crisis.
The study forecast that the region’s economy will grow in real terms by around 5.4 percent in 2010 and 6.6 percent in 2011 after a sharp slowdown in 2009 in the aftermath of the crisis.
"It can be said that the GCC countries possess the resources to completely overcome the effects of the global crisis within the next two years. Our estimates show that in nominal terms, the GCC economies will swell to around $1.15 trillion in 2011 this will of increase investors’ confidence in the region’s economies which are now classified as fast growing economies these economies are poised to maintain high growth in the next years," it noted.
The Washington-based Institute for International Finance showed the GCC’s combined nominal economy could reach around $1.01 trillion in 2010 as compared with nearly $877 billion in 2009 and $1.076 trillion in 2008. IIF estimated the combined non-oil sector in the GC this year at around $558 billion and the hydrocarbon sector at nearly $452 billion.
"These are good indicators but this does not mean the GCC countries have totally overcome the effects of the crisis…more measures are needed to be taken to stimulate some sectors, mainly those which were affect most by the crisis, such as the real estate sector. Tackling these effects will not be easy as it needs strenuous efforts and a long time despite a sharp rise in public spending and expectations that oil prices will remain high next year. GCC states have the resources to tackle these problems but the most important thing now is to consider restructuring the real estate sector and extending more support for affected banks and other companies," the report said.
EIB report added that "the fiscal expansion policies and other factors have already started to boost inflation rates, which could average three to 6 percent in 2011. But the GCC countries can still take measures to control inflation by diversifying their imports, monitoring and controlling domestic prices, and working on cutting transport costs, now among the highest in the world."
In a recent study, a key investment firm in Saudi Arabia warned that the weak dollar, to which most GCC currencies are pegged, have already pushed up inflation in some members back to pre crisis levels. It cited Saudi Arabia, where inflation in August climbed to its highest level of 6 percent in over a year.
NCB Capital said that "the Gulf countries are fairly rapidly growing emerging countries.
– Saudi Gazette