According to a Kuwait investment bank, gulf oil producers will likely remain basking in fiscal euphoria through 2012 for the second consecutive year because of strong crude prices and high regional production.
Global Investment House said in a study that although their economies will slow down in 2012 due to slightly lower crude prices and the global financial upheaval, the real GDP in the 6 nation Gulf Cooperation Council will remain positive and relatively high in some members.
The report estimated the six GCC members recorded a budget surplus of around USD 183 billion in 2011-2012 fiscal year while the surplus could edge down to nearly USD 179 billion in 2012-2013 due to a surge in spending.
It said Saudi Arabia, the largest Arab economy, is expected to account for nearly 45% of the 2012-2013 GCC surplus, with around USD 80 billion.
The report projected the surplus at just under USD 60 billion in Kuwait, USD 20 billion in Qatar, USD 18 billion in the UAE and just over USD 1 billion in Oman. Bahrain will be an exception as it is expected to suffer from a shortfall.
GIH said that "In Bahrain, political conditions have improved since the turmoil in the first quarter of 2011. The country’s financial sector which accounts for 25% of GDP was hit hard and saw various banking and investment giants pulling their operations out of the country. We anticipate Bahrain's nominal GDP to grow by 3.5% in 2012 and expect it to report a budget deficit as the country will face tough competition from its more stable neighbors for financial services and tourism business."
According to the report, Saudi Arabia needs a breakeven oil price of USD 84.5 to balance its budget in 2012 while the breakeven prices for UAE is USD 80. GIH estimated that price at USD 67.6 for Kuwait, USD 46 for Qatar, USD 75 for Oman and as high as USD 107.5 for Bahrain given its high spending and low oil output.
GIH said that "Despite the economic turmoil and slowdown worldwide, GCC region continued to fare better than other regional economies with an estimated nominal and real GDP growth of 24.3% and 6.9% in 2011, respectively. High oil price and increased production ensured continued healthy revenues in the GCC countries. Apart from higher oil prices, the growth was ensued by robust incremental government spending worth over USD 100 billion in 2011."
It said GDP growth in 2012 is expected to be lower than in 2011 in both real and nominal cases. It added that "A weaker global outlook will result in a more tough economic environment for the GCC and will present considerable downside risks to oil prices which are the core factor for nominal GDP growth."
A breakdown showed real GDP would grow by around 3.8% in 2012 compared with 3.3% in 2011 in the UAE, 3.6% against 6.8% in Saudi Arabia and 4.5% against 5.7% in Kuwait.
Citing projections by the IMF and other sources, the report put growth in Oman at 3.6% in 2012 as compared with 4.4% in 2011 and in Bahrain at 3.6% against 1.5% in the same period.
According to the report, Qatar, the world's top LNG supplier, will see its GDP growth tumble to nearly 6% in 2012 from as high as 18.7% in 2011 and 16.6% in 2010.
The IMF and other reports have expected Qatar's economy to revert to normal growth rates after a sharp rise over the past years following the recent completion of mega LNG projects that allowed the tiny Gulf nation to pump as much as 77 million tonnes of liquefied natural gas per year.
(Sourced from www.emirates247.com)
