Economic growth in key Gulf Arab states will slow markedly next year because of a sluggish global economy but remain well above recessionary levels, a Reuters poll showed on September 28.
Gross domestic product in Saudi Arabia, the largest Arab economy and the world's top oil exporter, is expected to expand 4.5 percent in 2012 after 6.2 percent this year, according to the median forecast of 16 analysts surveyed between September 14 and 27. The country's central bank governor reined in his expectations for growth on Wednesday, saying he was "optimistic" that the economy would grow at an annual rate of up to 5 percent this year and next compared to a previous forecast for this year of around 6 percent.
However, analysts in the Reuters poll lifted their forecast for Saudi growth in 2011 by 0.5 percentage point from the last poll taken in June. That was because of the surprising resilience of oil prices this year.
"The real GDP growth figures in 2011 are higher than we thought earlier. But in 2012, because these countries will not increase oil production, you will see the oil sector's contribution to overall GDP flat," said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.
Growth in Qatar, although still the strongest Gulf economy, is expected to plunge to 7.7 percent in 2012 from 18.9 percent this year, as the benefits of most of its increase in gas production have already been booked this year. The June poll predicted 7.8 percent growth for 2012.
The United Arab Emirates, the second largest Arab economy, is likely to grow at 3.8 percent next year instead of the 4.0 percent forecast in the June poll.
"The GCC (Gulf Co-operation Council) economies can easily weather the storm because the price of oil still trades above $80 per barrel, and hence the region's export accounts are very healthy," said Farah Ahmed Hersi, senior economist at Masraf Al Rayan in Doha.
However, Bahrain's growth outlook was slashed for the third time in a row in the latest poll to 2.0 percent in 2011, from 2.7 percent forecast previously. Political tensions and economic uncertainty persist in the island kingdom following its worst civil unrest since the 1990s. Its GDP growth is forecast to rebound modestly to 3.2 percent next year.
Oman, hit this year by more limited protests demanding jobs and an end to corruption, should see its economy expand by 4.2 percent in 2012, the poll found.
Saudi Arabia and Kuwait are likely to see the highest levels of inflation in the Gulf next year, with rates of 5.0 percent, the poll showed. However, the forecast for Saudi Arabia was cut from 5.7 percent in the previous poll.
In the UAE, inflation is seen accelerating to 3.0 percent in 2012 from 2.0 percent this year. Increased government spending on social issues is pressuring governments' fiscal balances this year, but all Gulf countries except for Bahrain are expected to remain in surplus. Because of high oil prices, Saudi Arabia's fiscal surplus this year is now forecast at 11.0 percent of GDP, up from the June forecast of 6.9 percent. Next year, the surplus is predicted to stay extremely high at 9.2 percent, even though the kingdom has pledged to spend an estimated $130 billion, or around 30 percent of its annual economic output, over several years on new houses, creating jobs and other areas.