Robust growth forecast for Gulf economies in 2006

KUWAIT CITY — The oil-rich Gulf monarchies, which boasted strong growth in the past three years thanks to record oil prices, are forecast to show another year of robust growth in 2006, despite a painful correction in the stock markets.

By (AFP)

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Published: Wed 14 Jun 2006, 10:12 AM

Last updated: Sat 4 Apr 2015, 3:24 PM

Gross Domestic Product (GDP) of the six-nation Gulf Cooperation Council (GCC) showed a real annual growth of just 2.5 per cent on average between 1998-2002 when oil prices dropped sharply.

But real GDP grew strongly by 8.5 per cent, 5.9 per cent and 6.8 per cent in 2003, 2004 and 2005, respectively and is forecast to grow by a healthy 6.4 per cent in the current year, according to the International Monetary Fund.

The GCC groups energy-rich Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) and which together pump around 16 million barrels of oil daily in addition to large quantities of natural gas.

Nominal GDP of the six countries grew from 404.6 billion dollars in 2003 to 475.1 billion dollars in 2004 and a mammoth 597.2 billion dollars last year, recording nominal growth rates of 29.8 per cent, 17.4 per cent and 25.7 per cent, respectively.

The high growth rates were attributed to a sharp rise in oil prices which shot from an average of 35 dollars a barrel in 2004 to 53 dollars a barrel last year and is expected to be in the 60s for the current year, IMF said.

The GCC states are estimated to have posted around 300 billion dollars in oil revenues last year and the figure is expected to rise further in 2006 as oil prices remained strong.

All the six nations have recorded huge surpluses in 2005, especially Saudi Arabia, Kuwait, UAE and Qatar.

Real oil growth registered 17.2 per cent in Saudi Arabia in 2003, compared to just 2.2 per cent last year. It is forecast to grow by 2.6 per cent in 2006.

In other GCC states, real oil GDP in 2005 grew by 11.3 per cent in Kuwait, 3.4 per cent in Qatar and 8.4 per cent in UAE.

Economists in the region have raised fears that the huge surpluses could delay necessary economic reforms needed to rectify structural ills in Gulf economies that have remained largely dependant on oil price fluctuations.

Real non-oil economic growth registered 8.6 per cent in Saudi Arabia in 2005, compared to 8.3 per cent in Qatar, 6.8 per cent in Kuwait and 7.8 per cent in UAE. They are forecast to post higher growth rates this year.

Opec kingpin Saudi Arabia, the largest economy in the Arab world, saw its nominal GDP grow from 214.9 billion dollars in 2003 to 307.8 billion dollars two years later. It is forecast to hit 346.3 billion dollars in 2006.

Riyadh used its surplus to pay part of its huge public debt, mostly domestic while other states have used the surplus to increase their asset formations.

Saudi government debt which was 82 per cent of GDP in 2003, dropped to 65 per cent in 2004 and to just 46.5 per cent last year. IMF expects it to drop to 27.1 per cent, or 94 billion dollars, by the end of this year.

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