Real economic growth in Saudi Arabia, UAE and Kuwait is already forecast to slow down by around three percent.
Qatar, on the other hand, has announced robust economic outlook for the current year with gross domestic product (GDP) growth expected to be more than a huge 28 percent.
According to Dr Rasim Kaan Aytogu, group executive director of Tanmiyat Group, Saudi Arabia and UAE, tight credit markets and higher inflation are sure to hit economic growth in Saudi Arabia, UAE and Kuwait.
Since the Gulf region is more reliant on oil revenues and the prices of the conventional fuel have been nose-diving after peaking at record highs of around $ 147 per barrel in July last year, their economies are bound to be somewhat affected.
The situation may turn a bit more challenging as the demand for oil gets reduced due to the global recession prompting crude exporting countries to resort to production cuts. Growth in the UAE, the second largest Gulf economy, is already expected to decelerate to 2.7 per cent this year from an impressive 6.8 percent in 2008
The abrupt slowdown in the UAE may be amplified by a series of job cuts in Dubai, the regional commercial hub, as it suffers from a property market correction, said Aytogu.
In Qatar, which has been witnessing an economic boom and emerging as the global hub of liquefied natural gas (LNG), the recessionary pressure whose impact is being felt across the world, the economic scenario is expected to remain robust as the share of LNG, condensates and other hydrocarbon products in the GDP has been increasing quite substantially.
A silver lining of the pessimistic economic outlook for the rest of the GCC region, according to Aytogu, however, is that inflation would ease.
Meanwhile, HSBC confirmed that the Gulf Arab oil producers are poised to witness an abrupt slowdown in economic growth this year and could face recession if average crude prices fall toward $ 25 a barrel. “2009 will feel like recession in much of the Gulf, but economic deceleration is not likely to lead to derailment,” HSBC’s regional economist Simon Williams said in Dubai yesterday.
“Although we think Gulf states will be ready to run deficits, dramatically reduced revenues will likely lead Gulf governments to pare back spending plans,” he said.
HSBC expects oil prices to average $ 45 a barrel this year — less than half the average 2008 price, forcing at least Saudi Arabia, Bahrain and Oman to run fiscal deficits as they keep spending to sustain their economies.
The bank said Saudi Arabia’s budget deficit is likely to hit about $ 26.5m this year — higher than the finance ministry’s $ 17.3 bn projection last month. The kingdom posted surpluses of $ 378.1bn in the 2003-2008 period.
“After five years of plenty, the Gulf is well placed to maintain oacrder in the face of a sharp drop in oil revenues,” HSBC said.
“Since oil prices began to rise in 2003, the region’s economic structure has begun to adjust to higher prices. Fiscal spending, in particular, has risen as revenues have soared, driving the minimum oil price required to hold the budget in balance upward.”
Economic growth rates across the oil-exporting region would slow abruptly this year to as low as 0.8 percent in Saudi Arabia, 0.9 percent in Kuwait and 1.1 percent in the United Arab Emirates, HSBC said.
The three largest Gulf economies posted growth in real gross domestic product (GDP) of 4.3 percent, 6.7 percent and 7.1 percent last year.
If oil prices fell to $ 25 a barrel this year, all Gulf states, except possibly Qatar, would fall into recession, HSBC said.
GDP growth in Qatar, the world’s largest exporter of liquefied natural gas, is likely to fall to 9.8 percent this year from 15.2 percent in 2008, HSBC said.
Qatar closes Israeli office, orders staff to leave
Qatar News Agency: Qatar Foreign Ministry summoned this morning the Head of the Israeli trade office in Doha and handed him an official memorandum containing Qatar”s decision closing the office and ordering its staff to leave within a maximum period of seven days as of next Sunday 18/01/2009. This came in a statement by an official source at the Foreign Ministry.
