GCC's forex reserves spill inflated oil revenues
GCC oil producers are called upon to produce more oil to fill the shortfall in supply created by the regional political turmoil
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Gulf countries are experiencing a big surge in their balance of payment surpluses due to high oil prices and increased oil production and exports, senior officials from the Institute of International Finance (IIF) said yesterday.
"GCC oil producers are called upon to produce more oil to fill the shortfall in supply created by the regional political turmoil. The additional supply of oil at higher prices is giving a big boost to government revenues and foreign exchange reserves," said George T. Abed, IIF senior counsellor and director for Africa and the Middle East.
The IIF expects oil prices to average $114 per barrel through 2012 with GCC oil production this year near 17.3 million barrels per day (bpd) compared to 16.5 million in 2011.
With the projected uptick in oil exports, the IIF has forecast the GCC's external current account surpluses to rise to a record high of $358 billion (Dh1.31 trillion) this year compared to $327 billion last year.
The net foreign assets of the GCC countries are expected to surge to $2.1 trillion this year compared to $1.9 trillion last year. With a significant boost to the government surpluses combined with the prospects of sustained high oil prices, the IIF expects the GCC economies to report robust growth this year although some moderation is expected.
"We are forecasting some moderation in overall 2012 GDP growth for the GCC at 4.9 percent after the exceptional rise of 6.9 percent last year," said Garbis Iradian, IIF Deputy Director for Africa and Middle East Department.
While Saudi Arabia is expected to see 5 percent growth in GDP this year, the UAE's GDP growth is forecast to decline to 3.2 percent from 4.7 percent last year.
"In the UAE, Abu Dhabi is growing faster than Dubai. Although Dubai has made significant progress in restructuring the debts of government-related entities and some key sectors such as trade, tourism and hospitality are reporting strong growth, the real estate sector will continue to be a drag on its economic growth for some more time," said Abed.
Average crude oil production in Abu Dhabi is expected to increase by 3.5 percent in 2012, compared with an increase of 9 percent in 2011. Continued higher oil prices and fiscal surpluses have encouraged Abu Dhabi to go ahead with several of its large projects this year.
The IIF estimates that the renewed emphasis on public spending will more than offset the decline in private sector spending and investment this year. The IIF said the GCC banking sector as a whole remains profitable and well capitalised.
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