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Gulf Oil Countries in Better Position to Weather Crisis

DUBAI — Gulf oil exporting countries are well-placed to weather a downturn in the global economy despite a nearly $100 a barrel drop in oil prices from record highs this summer, says a research report of the Institute of International Finance (IIF).

The IIF is the world’s only global association of financial institutions and its members include most of the world’s largest commercial banks and investment banks.

The Gulf oil states are becoming increasingly integrated into the global economy, not only through the trade of oil and natural gas around the globe, but also through their sovereign wealth funds that have invested trillions into both mature and emerging economies, revealed the IIF in its report.

Given the increasing financial integration of the Gulf Cooperation Council (GCC) with the rest of the world, the region is not escaping the fallout from the global financial turmoil.

However, the GCC countries are better prepared to deal with the current global financial crisis and the decline in oil prices than in the past three decades.

The report says risks have risen, but remain localised and manageable given ample resources and improve macroeconomic fundamentals.

The GCC economies will experience a sharp drop in oil revenues and slower, albeit still solid growth in 2009.

Growth in the GCC

According to the report, growth in the six countries of the GCC is expected to moderate and inflation to ease.

Real GDP growth will slow to 4.2 per cent in 2009, from 5.7 per cent in 2008 due to reduced oil production, tighter credit conditions, and substantially lower oil prices.

Nonhydrocarbon real GDP growth for the region is projected to fall to 5.4 per cent in 2009 from 6.4 per cent in 2008.

Growth in the region continues to be driven by private construction, retail trade, and transportation, spurred by fiscal stimulus financed by still sizable oil revenues and by improved business environment, says the report.

· abdulbasit@khaleejtimes.com