Standard & Poor’s considered that the economic prospects of oil-exporting economies in the Gulf Cooperation Council (GCC) look healthier over the next few years than they did in the initial phase of the global financial crisis in 2008-2009. It attributed this outlook to the geographic distribution of growth between developed and emerging markets, with the latter outperforming the former, which should keep oil prices firmly on an upward trajectory in the next three to five years. It expected global oil demand to rise by about 1.75% over the next decade; adding that strong demand from emerging markets will benefit the GCC economies as more than 70% of GCC exports, mainly crude oil, are destined for Japan and the developing Asian countries.
As such, it expected the GCC’s strong current account position to further improve, constituting a key strength at a time when demand for funding on international debt markets becomes more competitive.
S&P projected real GDP growth in the GCC economies to moderate from 7% in 2011 to 5% in 2012 and 4% in 2013, given that oil production will expand less rapidly in percentage terms than in 2011 when shortages in Libya lifted production in the GCC economies. It expected inflation to remain moderate overall at about 3% due to the declining global non-oil commodity prices.
But it noted that the GCC economies face important demographic challenges that would only be met through continuous efforts to diversify their structure away from hydrocarbons, as the oil sector is more capital-intensive than labor-intensive. It said that most of the GCC governments have recognized the necessity to encourage the shift of the national workforce from the public sector to the private non-oil sector and to foster the expansion of the latter. As such, it considered that achieving these objectives will be important to position the GCC economies on a long-term sustainable growth path.
Source: Standard & Poor’s – Byblos Bank