GCC countries are expected to see average economic growth of 4.2% in 2014 and 4.1% in 2015 on the back of robust non-hydrocarbon activities and large budget surpluses, according to a new report.
Credit insurance company The Coface Group predicts that Qatar will see the strongest growth in the region over the next two years, with its economy expanding by 5.9% last year and 6.7% in 2015.
It added that the UAE is expected to grow by 4.3% and 4.2%, Saudi Arabia by 4.2% and 3.8%, Bahrain by 3.9% and 3%, Kuwait by 2.2% and 2.5% and Oman by 3.8% and 4%.
After a period of political and social turmoil, economic activity is also gaining strength in the wider Middle East and North Africa region, Coface said.
Growth is expected to stand at 2.6% in 2014 and to accelerate to 3.2% in 2015 on the back of global economic recovery and preliminary signs of political consensus in some countries of the region. However the growth performance will continue to be below the 2000-2010 average of 5.4%, the report added.
It said diversification policies have helped the GCC region to support non-hydrocarbon industries with the share of the hydrocarbon sector’s contribution to regional GDP declining from 41% in 2000 to 33% in 2014.
“These countries also benefit from solid financial fundamentals such as huge assets in their sovereign wealth funds and external surpluses. However the sharp decline in oil prices would weigh on growth performances and fiscal balances in 2015,” the report added.
On the oil importers (Egypt, Jordan, Lebanon, Morocco, Tunisia) side, the recovery in tourism, investor’ confidence and exports, supported by the recovery in European countries, are expected to contribute positively to the growth performance.
However it warned that regional turmoil would weigh heavily on the economic performance of some countries like Iraq and Libya. Iraq and Libya are expected to contract 2.5% and 19.8% respectively in 2014.
Seltem Iyigun, economist for the Middle East and North Africa region at Coface, said: “The divergence between the oil exporters and oil importers persists and the real growth rates remaining below the 2000-2010 average for both groups.
“Nevertheless most of the GCC countries were able to stay out of the geopolitical tensions which allowed them to continue to attract foreign investments and record solid growth rates. They continue to invest heavily in non-oil sectors to transform their economies. This also reduces their vulnerability to a sharp decline in energy prices.”
She added: “But there are still some challenges that need to be addressed regarding future deterioration of fiscal balances, high level of bureaucracy and improvement of transparency.”
