Gulf economies to slow down in 2012

DUBAI: The economies of Gulf hydrocarbon producers are projected to grow by nearly 7 per cent in 2011, but growth could tumble to nearly half that rate next year because of an expected decline in crude prices and production in the region, a bank in Saudi Arabia has said.

Average oil prices could dip to nearly USD 100 a barrel in 2012 from around USD 110 in 2011, while crude output of the six-nation Gulf Cooperation Council (GCC) is expected to shrink to around 15.68 million barrels per day from about 15.91 million bpd, the Saudi American Bank Group (Samba) said in a study.
The GCC region comprises Saudi Arabia, Qatar, the UAE, Bahrain, Kuwait and Oman.
“The weaker global outlook will provide a more challenging economic environment for the GCC and presents considerable downside risks to oil prices,” the study said.
In addition, while GCC trade is increasingly orientated toward emerging markets and particularly Asia, lower growth in the developed economies will generate headwinds through weaker trade and tourism activity with the GCC and will also dent growth prospects in these emerging markets, it said.
Capital flows to the GCC may also suffer and valuations and earnings on GCC external assets may decline, it added.
“That said, the structural strengths of GCC economies are expected to allow states to weather the storm and sustain growth, even if this means shrinking fiscal surpluses or even deficits,” it said.
The bank forecasts showed the GCC’s combined real GDP would soar by around 7 per cent in 2011, but growth is projected to tumble to 3.7 per cent in 2012.
The 2011 growth rate is the highest since 2008, when regional economies grew by 7.1 per cent due to high oil prices and supplies.
After an expected gain of a staggering USD 277 billion this year, the GCC nominal GDP could still swell in 2012, but at a lower rate, expanding by around USD 29 billion, the study said.
“The uncertain global outlook suggests that the current strength in oil prices (Brent will average around USD 110/barrel this year) will not be sustained into 2012. However, oil markets are expected to continue to receive support from emerging markets where oil demand growth is projected to be sufficiently robust to offset declines in OECD demand,” SAMBA said.