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NBK GCC Brief
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GCC: economic outlook positive, with some uncertainty
The recent months have witnessed an overwhelming consensus that the global economy is on the road to recovery, suggesting that the bottom of the financial crisis is behind. A number of recent economic indicators and signs strongly suggest the crisis has subsided. The most recent projections of the IMF show the world economy is expected to contract by 1.1% in 2009 and expected to recover 3.1% next year. This represents an improvement of 0.3 and 0.6 percentage points from the Fund’s projections three months earlier, respectively. There is, however, less agreement among economists on the shape of the probable global recovery; “W”, “V”, “U” or something in between.
The road to this recovery has been cemented to a large extent by governments around the globe expanding fiscal and monetary policies, bailing out firms, and injecting capital and liquidity in the banking system. Nowadays, new economic concerns are emerging as governments, including the G20, start talking about the post crisis environment and the proper timing of an “exit” strategy. “Exit”, of course, entails the withdrawal of governments’ stimulus, whenever the signs of solid and durable recovery are established. More likely, such an exit strategy will not be executed in most countries before the second half of 2010.
World economic recovery is good for the region….
The Gulf economies are definitely among the top beneficiaries of any global rebound. As oil continues to be the major driver of GCC macro performance, the higher oil prices that started to stabilize since June of this year began to gradually restore regional confidence and to leverage its favorable prospects. Recent consumer confidence surveys show a substantial improvement relative to earlier in the year. Indeed, the region’s economic performance and outlook have always been an oil story. Over the last 10 years, oil accounted for an average of 46% of GDP, 75% of merchandise exports, 84% of governments’ revenues. Numbers were even higher in recent years.
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Europe |
Americas |
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All data at market close |
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