Globa: GCC market review May 2009

15/06/2009 00:00 AST

After relentless decline over regional markets continued to rally in the month of May-09. The increase in oil prices during the month had a positive impact on regional markets. The gain in international markets also had a positive impact on GCC markets. All the GCC markets gained during the month with Qatar market gaining a whopping 17.1% during the month. In the last two months Global's DSM Index (Qatar) has gained 33.8% and erased all the losses to record a YTD performance of 0.4% at the end of the month. This recent upturn in the index may signal that investors confidence might be returning, especially after the government's backing which gave strong support to the market.

Kuwait market was the second highest gainer for the month by gaining 10.7%. The Kuwait market remained buoyant for the month as all the sectoral indices ended the month in positive territory. On the economy front, the Central Bank of Kuwait (CBK) announced cutting its benchmark discount rate by 50 basis points to 3.00 percent effective Thursday, May 14. Previously CBK reduced the discount rate by 25 basis points to 3.50 percent in April. CBK governor said that a planned 50 basis point interest rate cut was designed to reduce the cost of funding to help encourage growth in non-oil sectors.

Qatar Economic Outlook.

Qatar's economy continued to be one of the fastest growing economies of the region for the last few years. Preliminary estimates from Qatar Statistics Authority revealed a nominal GDP growth rate of 44% for 2008 to surge to a new landmark of QR372.4bn (US$102.3bn). Consequently, GDP per capita was lifted to a record level of US$70,630 in 2008 from US$57,936in 2007. Thus, Qatar continued to be one of the top ten wealthiest countries in the world with its GDP per capita exceeding the US$70,000 level.

Looking forward, Qatar's economic outlook remains positive despite the current financial turmoil and recessionary trend for the world economy. According to the Deputy Premier and Minister of Energy; "Qatar's economy has enough ammunition required to tackle the extraordinary regional and global conditions emerging out of the economic slowdown". Moreover, the Central Bank Governor stated that "Gas rich Qatar expects to shrug off the global financial crisis and post healthy economic growth in the range of 7%-9%". However, other estimates points to higher GDP growth rates to be registered for 2009.

The IMF forecasts 2009 real GDP growth at 15% to 18%, while the Economist Intelligence Unit forecasts real GDP growth of 13.4%. According to such estimates, Qatar is on the way to report the highest economic growth in the world for 2009. Such sustainable growth of Qatar is expected to prevail based on pillars of diversification and prudent government policies whether, monetary or fiscal. This is in addition to policies aiming to support private sector participation in development in addition to supporting banking system. Thus, we foresee the Qatari economy to continue its growth journey whether for the hydrocarbon or non oil sectors of GDP.

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