Gulf GDP to widen 5.8% despite drop in oil prices

09/07/2012 08:27 AST

The combined GDP of the six-nation Gulf Cooperation Council (GCC) is projected to expand by 5.8 percent to peak at $1.6 trillion in current prices, the report by the Kuwaiti-based Gulf Investment Company (GIC) owned by GCC governments, said.

The report said recent decline in oil prices will not affect the economies of Gulf hydrocarbon exporters given the high public spending and reforms being implemented by most members.

Benchmark US crude dropped by $2.77, or 3.2 percent, Friday to end the week at $84.45 per barrel in New York. Brent crude, which helps set the price of imported crude used to make gasoline, fell by $2.51, or 2.5 percent, to end the day at $98.19 per barrel in London.

Qatar will still lead growth in the region with around 8.7 percent while growth will be about six percent in Saudi Arabia and Kuwait, 4.5 percent in the UAE, 4.2 percent in Oman and 3.1 percent in Bahrain, said the report by the Kuwaiti-based Gulf Investment Company (GIC), which is owned by GCC governments.

"Despite speculation about a further oil price decline, the GCC economies are still expanding as they are based on real growth pillars," it said.

"The first and most important pillar is the high public spending in most member states as it accounts for nearly 35 percent of GDP… this is coupled with the implementation of massive projects worth nearly $1.1 trillion, almost a quarter of the world’s investment in infrastructure and energy."

The report showed Saudi Arabia and Qatar would account for the bulk of those projects which cover oil, gas, electricity and construction.

It said that despite a decline in oil prices over the past few weeks, they remained strong and suitable for the region’s economies, adding that crude prices averaged around $115 in the first half of 2012.

"Oil prices could average $95-100 in the second half of this year and this is relatively a high level…geopolitical factors have also prompted some GCC members to increase oil output and this means additional revenue and higher public spending…such developments, along with reforms being carried out by most members, will largely support their economies," GIC said.

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Saudi Gazette