The Gulf Co-operation Council’s (GCC) Gross Domestic Product (GDP) is estimated to reach US $ 1.5 Trillion in 2013, according to a Qatar National Bank (QNB) study. Propelled by the oil and gas sector, the region’s traditional driver of the economy, the combined GDP of GCC is likely to reach this figure mentioned above, considering Brent oil prices averaging around US $ 108 per barrel in 2012-13, said QNB.
The study forecasts GCC s real GDP growth to reach 4.6% in 2012-13, outperforming the global GDP growth, which the IMF expects at 3.6%. Small wonder, analysts consider the GCC as one of the world’s fastest economic growth rate regions.
The rise in the GCC’s weight in the global economy is a result of both high energy prices and rapid real economic growth.
This fact was recently reiterated by the IMF’s Middle East and Central Asia Department Director Masood Ahmed who said, “Middle East oil exporters are benefiting from high oil prices, and we expect GDP growth to strengthen and become more broad-based this year.”
GCC real GDP grew at an annual rate of 4.7% from 2007-11 compared with a world growth rate of 2.8%, making it one of the fastest growing regions in the world.
Further, the QNB report is encouraged to peg its optimistic outlook on strong government spending which has encouraged diversification. This has led to the expansion of the economy in non-oil sectors which will be vital to increasing the real GDP growth to 4.6% in 2012-13.
Gas production growth at 4.3% will outpace oil production growth at 0.4% due to stable global demand, Organization of Petroleum Exporting Companies (OPEC) caps and an investment focus on the gas sector, the report says.
The non-hydrocarbon sector’s growth, estimated around 9.0% in 2012-13, will be driven by manufacturing, particularly heavy investments into petrochemicals, fertilizers and metals production in Qatar and Saudi Arabia, and construction.
High levels of public expenditure will drive growth of 5.6% in services in 2012-13, which is largely made up of government and financial services and is expected to account for 36% of nominal GDP, according to the QNB report.
The six nations of the (GCC) – Saudi Arabia, Qatar, the United Arab Emirates (UAE), Kuwait, the Sultanate of Oman and the Kingdom of Bahrain – had a combined nominal GDP of US$1.4 Trillion in 2011, which accounts for 2.0% of the global GDP.
The GDP of the GCC has almost quadrupled in nominal terms since 2001, growing at a compound annual growth rate (CAGR) of 14.2%. This has led to a near doubling in its percentage share of global nominal GDP from 1.1% in 2001 to 2.0% in 2011.
The frenetic economic activity has attracted and continues to attract foreign skilled and unskilled workers to the region resulting in population growth that is almost triple the world rate with about 50 million people expected to be living in the GCC by 2013.
In fact, Qatar’s population, due to the economic boom, has grown rapidly over the last decade from approximately half a million to 1,792,134 people as of April 30 this year, according to figures released by the Qatar Statistics Authority (QSA), which record the number of people in Qatar.
The QNB report goes on to compare key economic indicators for 2012-13 and say, “The GCC is likely to have a larger current-account surplus than either Japan or Germany in 2012-13 as high oil prices boost exports.”
With oil and gas being the traditional drivers of the economy of the region, the report says, “around 86% of the GCC’s US$1.2 Trillion in total revenue for 2012-13 will come from the oil sector, supporting forecast expenditure of US$1.0 Trillion on social investments, administration and infrastructural development projects.
”The banking sector is resilient, well capitalized, profitable, has a low level of non-performing loans and is favorably placed to withstand turbulence in global markets during the forecast period.”
Regarding share market outlook, the report says, “The outlook for regional bourses is positive as government expenditure and solid GDP growth will support corporate profitability in 2012-13.
”The GCC’s business environment is internationally competitive, ranking above the Eurozone in the World Bank’s Doing Business rankings (#30) and the WEF Competitiveness rankings (#25) in 2012.
Regarding inflationary trend, the report says, “Inflation is expected to reach 3.0% in 2012-13 mainly due to rising rents in Saudi Arabia, without which forecasted inflation would only be 1.8%”.
The GCC economies are dominated by the oil and gas sectors which account for 43% of GDP in the GCC, compared with a global average of 5% of GDP. Services account for 63% of global GDP but only for 39% of the GCC economy.
Advanced economies tend to have large services sectors, and as the GCC develops, the contribution of the services sector to GDP should expand.
The strong performance in the oil and gas sector over the last five years has been a result of high energy prices and a sharp increase in gas production.
Regional oil production grew at 1.5% in 2007-11, to reach 19.4m barrels/day (b/d), while gas production surged ahead by 9.9% a year to 35bn cubic feet/day (cu ft/d).
The strong increase in gas production is mainly attributable to Qatar, where production increased at a rate of 24% in 2007-11 to 14.4bn cu ft/d.
The GCC accounts for 36% of the world s proven oil reserves and 22% of gas reserves, equating to 30% of global hydrocarbons reserves, measured in barrels of oil equivalent (boe). This is a significant share of global natural resource wealth, especially given the GCC s limited share of global population.
Within the GCC, Qatar has by far the largest relative endowment of hydrocarbons wealth, in terms of both reserves and revenue. This is primarily due to its development of the North Field, the world s largest non-associated natural gas field.
Qatar News Agency