Egypt and Yemen included? MENA economies to grow faster than the rest of the world
Despite slow growth across the globe, economies of Middle East and Gulf countries will remain buoyant this year and next year, predicts Euler Hermes Economic Outlook Report.
The report suggests that the Middle East is expected to post a GDP growth of 3.6 per cent in 2014 and 4.2 per cent in 2015 against 2.6 per cent in 2013.
Most GCC economies would expand at or above the regional average, the EH report forecasts. While Saudi Arabia is forecast to record a 4.5 per cent growth in 2014 and five per cent in 2015, the UAE is expected to witness four per cent growth in 2014 and 2015 against 3.5 per cent in 2013.
This is in contrast to world GDP growth, which is recovering at quite a slow pace — below three per cent for the third year in a row — and downside risks fail to subside.
Oil and gas will continue to fuel growth across GCC nations, it said. The GCC countries account for more than 29 per cent of global oil reserves and 23 per cent of gas reserves.
Output from the hydrocarbon sector was a key driver of growth from 2011 onwards when benchmark oil prices were $100 per barrel or above.
With the combined regional population of only 49 million, oil export revenue has enabled foreign exchange reserves to remain high, particularly the accumulation of financial assets held in sovereign wealth funds, or SWFs. The combined assets held under the SWFs of GCC countries is estimated at around $2,250 billion, with $975 billion held by the UAE and $680 billion by Saudi Arabia, says the Euler Hermes report.
This financial cushion will help increase the GCC countries domestic demand through state spending on infrastructure projects and also boost jobs and future growth in the region. Increasing social spending will help improve health, education and other welfare provisions, it added.
There were lingering concerns linked to the openness of markets and business regulations in the GCC but the World Bank’s Doing Business Survey for 2014 tells a different story. All the countries of the region have scored well.
Buoyant GDP growth, high domestic spending and improved business environments suggest that trade with GCC countries and doing business with their markets are likely to be bright spots in the evolving global economy, said the report.