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GCC: Economic growth to pick up for most states

Source: Middle East Insurance Review | Mar 2017

Growth is expected to improve this year across the GCC states, except in Oman and Bahrain, according to a global and regional economic outlook and sector analysis of Coface, a provider of trade credit management solutions and risk information services worldwide. The GCC economies recorded a sharp slowdown in 2016 amidst public sector spending cuts, tightening liquidity, and investor uncertainty.
 
   In the UAE, economic growth is expected to reach 2.5% in 2017, up from 2.3% in 2016 because the country is more diversified from oil than its neighbouring GCC states, according to the Coface analysis. Saudi Arabia’s economic growth is expected to reach 1.8% in 2017 from 1.3% in 2016.
 
   Qatar’s huge financial reserves and still-strong revenues from its gas sector will ensure continued public sector spending ahead of the FIFA 2022 World Cup. This will keep the country’s growth trajectory relatively high in the region. Qatar’s economic growth is forecast to be 3.3% in 2017, up from 2.6% in 2016.
Kuwait’s economic growth more than doubled from 2015’s 1.1% to 2016’s 2.4%. In 2017, its growth rate is forecast at 2.6%. 
 
   Bahrain’s economy is expected to shrink to 1.7% in 2017 from 2% in 2016. 
 
   Growth in Oman will also dip slightly to 1.7% in 2017 from 1.8% in 2016.
 
   “Oil prices are not expected to return to the previous high levels immediately. This is why public spending in the GCC will remain cautious. A wide range of factors that would impact regional and global consumption patterns calls for greater measures to protect business assets,” said Mr Massimo Falcioni, CEO of Middle East Countries at Coface.
 
Economy to expand by 1.6% on non-oil sector’s growth
The GCC region’s non-oil sector is expected to grow by 2.4% this year and 3.2% in 2018 due to easing of fiscal consolidation and a modest recovery in oil prices, said the Washington DC-based Institute of International Finance (IIF). However, overall growth in the six GCC countries is expected to slow further from 2% in 2016 to 1.6% this year, reflecting the decrease in oil production following the November 2016 OPEC agreement.
 
   The GCC has responded to the sharp deterioration in fiscal accounts by launching much-needed fiscal reforms. The sizeable fiscal consolidation underway, combined with a gradual recovery in oil prices, should put fiscal positions on a more sustainable footing, reported The Peninsula citing the IIF.
 
   With average oil prices expected at US$52/bbl this year, up 16% from 2016, the consolidated fiscal deficit of the GCC is expected to narrow from $144 billion in 2016 to $77 billion in 2017, while the current account is projected to shift from a deficit of $43 billion to a small surplus.
 
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