Qatar  | عربي

Real GDP growth in the GCC is likely to have slowed from 7.8% in 2011 to an estimated 5.7% in 2012, according to QNB Group. This remains a relatively high rate of growth compared with many other countries in the current challenging global economic and financial environment. The non-oil sector has driven growth while oil output has also risen.

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In 2012, oil prices remained at historically high levels, boosting government revenue and spending, which, in turn, boosts growth across non-oil industrial and services sectors. Around 22% of government spending is capital expenditure, mainly on infrastructure in transport, real estate, education and healthcare sectors. Government spending, therefore, supports non-oil sectors such as construction and utilities.

The remaining 78% of government spending is current expenditure, mainly on government wages and other public services. This provides an injection of income into the GCC non-oil economy, driving growth in services and retail trade.

Additionally, non-oil industry has grown strongly as investment in major manufacturing projects, particularly petrochemicals, has boosted output.

Rising oil production was also an important factor driving growth in 2012. Total GCC oil production reached 17.2m barrels per day, on average, in the first three quarters of 2012, 6.2% higher than in 2011. Higher oil production came as OPEC removed its production quotas for individual countries. The quotas had initially been put in place in 2009 when oil prices crashed, but were replaced in 2012 with a more relaxed aggregate production target for all OPEC members. OPEC also ramped up production in 2011-12 to calm oil markets as concerns grew about lower output in countries such as Libya (due to the Arab Spring) and Iran (due to sanctions).

Overall, despite historically high oil prices and rising oil production, strong growth in the non-oil GCC economy has sustained its share in total GDP at around 50% in 2012. QNB Group estimates that total nominal GDP in the GCC was US$1.56tn in 2012, or 2.2% of global GDP.

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Saudi Arabia is the largest GCC economy, accounting for around 47% of the region’s GDP. The oil sector has underpinned the Saudi economy with production averaging 9.8m barrels per day in the first three quarters of 2012, up from an average of 9.3m in 2011. Real growth was even stronger in the Saudi non-oil sector in 2012 at 7.2%. Ongoing major investment projects have supported growth in sectors such as construction, which expanded by 10.3% in 2012.

The UAE is the second largest economy in the GCC, accounting for 23% of GDP. UAE real GDP growth for 2012 is estimated at 4.0% in the IMF’s most recent Middle East regional economic outlook. Oil production was 3.2% higher in the first three quarters of 2012 than in the same period of 2011. The UAE is more diversified compared with other GCC countries with the services sector playing a relatively prominent role in the economy. The UAE was hard hit by the global financial crisis and a real estate crash that brought on its own ensuing debt issues. However, growth in 2011-12 has been higher than many had expected as crucial sectors, such as construction, real estate and financial services have begun to show a promising recovery.

Qatar is the third largest economy in the GCC, accounting for 12% of regional GDP. There has been a slowdown in real GDP growth as the State’s rapid liquefied natural gas expansion programme has peaked and further expansion has been put on hold, for the time being. However, growth is still strong at 6.1% in 2012 due to the non-oil sector. The non-oil industrial and services sectors are estimated to have exhibited strong growth of 10.1% and 9.1% respectively, according to QNB Group. This compares to just 2.1% for the oil and gas sector.

Kuwait accounts for 11% of GDP in the GCC. GDP growth is estimated at 6.3% in 2012, driven mainly by a 12.1% increase in oil production to an average of 3.0m barrels per day in the first nine months of 2012. Non-oil growth should also be strong, supported by spending on projects. The 2012/13 budget amounted to US$75bn, a 9.3% increase on the previous budget, although bureaucratic constraints can lead to actual spending coming in below budget, particularly for capital expenditure.

Growth in Oman, which accounts for 5% of GDP in the GCC, was forecast to remain relatively steady at around 5.0%, according to the IMF, driven by gently rising oil production and major expansions in the petrochemical sector. A recent statement from the country’s Minister of Finance, however, put 2012 real GDP growth even higher at 8.3%.

Finally, growth in Bahrain, which accounts for 2% of GDP in the GCC, was forecast by the IMF to have been just 2.0% in 2012. Bahrain’s economy is more diversified than the rest of the GCC as it has a strong services-oriented non-oil sector (financial services account for 18% of GDP) and relatively limited oil reserves.

Going forward, although oil production is levelling off, non-oil sectors are likely to grow strongly in most countries, supported by rising government expenditure. Budget spending continues to rise across the GCC on the back of strong inflows of hydrocarbons revenue.


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