An unexpected development: GCC growth to slow down in 2013
The economic growth of Gulf Cooperation Council (GCC) countries is expected to slow down to 4 per cent this year, according to Euler Hermes.
Global economic trends and the influence of GCC countries in the international market will be discussed on Monday at the Trade Credit Insurance Summit in Dubai, according to a report to be released in conjunction with the event.
Ludovic Subran, Chief Economist at Euler Hermes International Trade Observatory is expected to highlight the changes in the global economy and expectations for regional growth.
“GCC countries, having experienced two years of sustained economic growth, are expected to slow to 4 per cent in 2013 mainly due to the global demand slowdown. A global and delayed recovery is expected in 2014 (+3.1 per cent). However, the overall growth deceleration will increase the momentum of global insolvencies (+8 per cent in 2013; +2 per cent in 2014),” he said in the statement.
In 2011 and 2012, GCC countries posted strong economic growth with 7.2 per cent and 6.0 per cent growth, respectively but the pace is expected to slow in 2013 to 4 per cent and 2014 to 4.3 per cent, Subran stated.
Saudi Arabia and the United Arab Emirates are expected to lead the way for GCC growth with Subran stating that Saudi and the UAE will grow by 4 per cent and 3.5 per cent respectively in 2013, and 4.5 per cent and 4 per cent respectively in 2014.
Subran stated that GCC countries, with a strategic position as major global oil exporters, benefit from a strong commercial and budgetary position. The expected oil production decline in 2013, driven by a decrease in US demand due to shale gas and slow growth in China, will see a reduction in budget surpluses. However, Subran stated that this should be partially offset by an increase in non-oil exports.
Significant diversification efforts among the GCC countries have made their economies to reduce dependence on petroleum products. The UAE’s share related to oil in total GDP decreased from 47 per cent in 2000 to 33 per cent in 2012, according to the statement.
Driven by diversification, Dubai has become the regions leading service centre and Abu Dhabi is focusing on manufacturing, petrochemicals, and renewable energy. Diversification has lead to GCC countries widening their reach in the export market. According to the statement GCC countries have been able to diversify their trading partners by increasing the focus on the Asian market.
The statement said new opportunities in North Africa and Turkey may emerge in light of a weak Asian market forecast. Southern Europe should also represent solid opportunities for non-oil exports, the statement said.