“While not achieving last year’s growth rates, a substantial existing project base and government initiatives will ensure diesel demand increases in the range of around 80mn bpd in 2009. Many of the highly energy intensive sectors continue to grow in the Gulf countries,” FirstEnergyBank said.
The key downside risk to this forecast, however, could take place towards the second half of this year if sufficient liquidity to provide the necessary momentum in the industrial and property sectors did not materialise.
On the other hand, an easing of credit or direct government funding of some of the largest projects could put plans back on track, providing the impetus for higher rates of diesel consumption growth.
According to FirstEnergyBank the region’s aviation industry was expected to fare comparatively well throughout 2009, having established a core and growing base of customers on higher margin, long-haul routes and helped along by lower jet fuel prices and newer, more efficient aircraft.
The strong demand growth for gasoline partly reflects heavily subsidised markets but also steep growth in consumer finance, which led to a boom in car markets in recent years. While the smaller Gulf countries will experience slowdown in demand growth rates, the relative size of those markets will result in insignificant changes to regional balances.
FirstEnergyBank also said the economies of the six Gulf Co-operation Council countries are likely to be in a good position to weather the financial storm though state budgets will suffer from a precipitous drop in oil receipts.
Prudent management of the windfall revenues over the last few years has allowed these states to both pay down debt and amass substantial foreign reserves.
Although fiscal or current account deficits could undermine the investor confidence that has been a crucial element of this economic boom, any such shortfalls could be easily financed either by drawing down reserves or issuing new debt.
Perhaps more worrying for the GCC is that two main engines of regional growth in the last several years – globalised services (tourism, transport, trade and finance) and energy sector related investments are not likely to see a significant rebound anytime soon.
