GCC economy “returns to normal” after 2011 high growth

The economies of Gulf hydrocarbon producers are projected to return to normal growth rates of around four per cent this year after racing by more than seven per cent in 2011, Saudi Arabia’s largest bank said on Tuesday.

Growth this year will be achieved due to high public spending by most members of the six-nation Gulf Cooperation Council (GCC) as well as strong oil prices and recovering bank lending, National Commercial Bank (NCB) said.

Study said the GCC economies, which account for just less than half the total Arab GDP, generally expected a year of robust growth in 2011 following the surge in oil prices to record high levels and increased production which in turn supported ambitious government spending plans.

The report said 2011 saw a sharp rise in public expenditure above the original budget targets as governments in the region moved toward what it described as a more inclusive growth paradigm, strengthening the emphasis on areas such as housing, job creation, and social benefits.

The result was regional growth of some 7.2 per cent, led by an estimated 18.7 per cent in Qatar, seven per cent in Oman, and 6.8 per cent in Saudi Arabia. Even the UAE, the second largest Arab economy, made significant headway in terms of increased private sector activity, greater confidence, and progress in contain problems in areas such as real estate, it said.

“After a year of a rapid pick-up in growth, 2012 is likely to prove significantly less impressive in terms of the headline growth figures. But it is obvious from the budgets unveiled by regional governments to date that public sector expenditure will remain strong while oil prices and production levels are generally expected to prove fairly stable,” the study said.