The International Monetary Fund raised its 2011 projection for GCC growth to 7.8% from 5.2% and said that high oil prices would also boost the six nation group’s current account surplus growth by 124% to USD 304 billion.
The Fund said that GCC’s growth would gain increased momentum from Qatar, growing at 20% and Saudi Arabia at 7.5%. The UAE will grow by 3.3%. Overall, GCC’s nominal GDP is estimated to reach USD 1.402 billion in 2011 from USD 1.084 billion in 2010. UAE’s nominal GDP is estimated to reach USD 363.8 billion in 2011 from USD 301.9 billion in 2010.
The multilateral lender said in its Regional Economic Outlook released that consumer price inflation in the GCC is forecast to soar by 5.3% while its pace will be slower in the UAE at 4.5%. In the Middle East and North Africa region inflation was expected to increase to an average of 102% as concerns about food security rise. It said that some governments, particularly in the GCC will need to carefully monitor the impact of expansionary fiscal spending on aggregate demand to prevent a resurgence of inflationary pressures.
The IMF gave a separate projection for the GCC non oil growth and said that it is set to accelerate by more than 1% to 5.3% in 2011. The IMF’s overall economic growth forecast for GCC up from 5% in 2010 is far rosier than the outlook for the rest of the Middle East region as oil production expands to stabilize global oil supply in the face of supply disruptions elsewhere.
The IMF said that average real gross domestic product or GDP growth, for Middle East oil exporters in general, excluding Libya is projected to reach 4.9% in 2011 compared with 3.5% in 2010 and its previous estimate of 4.5%. For most oil exporters, the expected increase in oil prices from USD 79 per barrel to USD 107 per barrel and production volumes will lead to higher growth in 2011 and stronger fiscal and external balances.
While current account surplus of oil exporters in the Middle East is estimated to increase from USD 172 billion to USD 378 billion, the GCC region alone will account for USD 304 billion in current account surplus in 2011 up from USD 136 billion in 2010, reflecting an increase of 124%.
Mr Masood Ahmed director of the IMF’s Middle East and Central Asia Department said that “The changes in motion in the Middle East and North Africa are historic. Over time, they could give a boost to the economies in the region by setting a more inclusive growth agenda, improving governance and providing greater and more equal opportunity for its young and growing population.
He said that however, the near term outlook is challenging, and the immediate priority for oil-importing countries in particular is to maintain social cohesion and macroeconomic stability in the face of multiple pressures. Two developments mark the IMF’s outlook for the region: unrest in parts of the Arab world and the surge in global fuel and food prices. As a result, the near term economic outlook is subject to unusually large uncertainties stemming from the fluid political and security situation in a number of countries.
Mr Ahmed said that growth is likely to be uneven in 2011, but the GCC as a group is racing ahead. Bahrain, Iran, Libya, Sudan and Yemen are likely to be negatively affected but the rest are expected to grow well above trend.
Dr Nasser Saidi chief economist and head of External Relations at DIFC said that we are in the midst of a period of momentous change, of risk and uncertainty but also of promise and opportunity. Recent events have uncovered demographic, political, governance and economic vulnerabilities in a number of MENA countries.
He said that the recent surge in inflation has exacerbated these vulnerabilities. Economic policy should address these vulnerabilities through structural reforms aiming at raising growth rates through more inclusive growth with greater pull up effects with job creation and higher productivity growth based on a growing role for the private sector, including through participation in infrastructure and development projects. We have the natural and financial resources to implement reforms and improve governance.
Mr Saidi said that higher energy prices would allow the GCC countries to play a key role in greater regional integration and as an engine of growth for the non-oil MENA countries. We will need to ensure that the strides made by the region’s governments in recent years towards economic liberalization diversification and integration are not rolled back for short-term popular gains.
(Sourced from khaleejtimes.com)
