The economic outlook for the GCC region as a whole remains positive, as the surge in oil revenues and fiscal reforms of past years will provide the necessary cushion for GCC countries to support economic growth through capital expenditure, says Kuwait Financial Centre Markaz, an asset management and investment banking institution, in a recent report.
Although the recovery in oil prices did not last throughout 2018, GCC economies witnessed a sizeable increase in oil revenues. Their fiscal and external balances started to recover after three lacklustre years with only Bahrain and Oman running twin deficits in 2018.
With the exception of Bahrain, where there is weakness in government finances, economic factors remain largely favourable for other GCC countries.
The economy of Kuwait is expected to grow by 4.06 % in 2019 according to the World Economic Outlook released by the International Monetary Fund. With the largest fiscal buffers among its GCC peers as well as a very low fiscal breakeven oil price, Kuwait has insulated itself from future uncertainties in the form of losses due to fall in oil, says Markaz.
Saudi Arabia plans to increase state spending by 7% in an effort to support economic growth that has been hurt by low oil prices. The mark-up in spending would delay the Saudi Government’s plan to eliminate its state budget deficit by the year 2023.
According to the latest IMF estimates, UAE’s GDP growth is expected to be higher in 2019. Given large fiscal buffers, ample spare capacity, and rising investment needs for Expo 2020, the government has appropriately switched to providing stimulus to the economy. The introduction of VAT in 2018 has been a historic milestone and is expected to substantially strengthen and diversify government revenues in the coming years.
Qatar’s banking system remains healthy with ample liquidity, high asset quality and strong capitalisation. Deposit growth of 6% and loan growth of 5% in 2018 should result in a further decline in the loan-to-deposit ratio. The real estate sector, which was under considerable pressure last year, has seen a healthy rebound in 2018 with the sector gaining 14.2% this year. Qatar’s real estate sector is expected to see further growth, due to positive legislative changes by the government on the ownership of properties by foreign investors, which is likely to encourage further investments in this sector. In December 2018, Qatar announced its withdrawal from OPEC on the basis of its long-term strategy of shifting focus towards gas and away from oil.