Gulf economies which grew 7 percent despite global and regional turmoil will not see a similar growth rate next year, said Samba analyst Keith Savard who co-wrote the GCC Outlook 2012 report. “While sustained fiscal stimulus will continue to bolster non-oil sectors, a weaker global environment and reduced contribution from oil sectors will see growth dip to 3.7 percent in 2012,” Samba said. Still, years of $100 oil prices have left Gulf states in the pink of economic health. “Although government spending has risen sharply and oil prices are expected to decline, GCC states (except Bahrain) are still projected to run healthy fiscal and current account surpluses in 2012. That said, fiscal positions are now more vulnerable to oil price movements. The average budget break-even price for the GCC as a whole is estimated to have risen to $70/b.” Other analysts such as Deutsche Bank put that figure much higher to $100 and Apicorp estimates it to be around $88. Economically speaking, Saudi Arabia had a pretty good year. Overall growth is expected at 5.8 percent this year, driven by a substantial increase in crude oil production and government spending. For the whole of 2011, non-hydrocarbon real GDP is expected to grow by 4.8 percent. We expect private sector activity to moderate in the second half of this year and in 2012, according to IIF estimates. Saudi Arabia's GDP is set to hit $572-billion in 2011 from $435-billion in 2010, and ease back to $565 billion in 2012. Oil production is expected to increase by only 2 percent (from 9.3 mbd in 2011 to 9.4 mbd in 2012). “This will bring our forecast for real GDP growth down from 5.8 percent in 2011 to 3.7 percent in 2012. We expect oil production to decline modestly towards the end of this year as global demand for oil weakens due to worsening economic conditions in the U.S. and Europe, and as prospects for the return of some exports from Libya improve. Crude oil production was 9.8 mbd in August then declined to 9.4 mbd in September according to official sources,” the IIF said. The Arab Spring movements in the broader Middle East and Africa (MENA) region have focused the minds of GCC leaders, noted Samba. “Their immediate response has been to accelerate measures aimed at addressing unemployment and social issues in the region, primarily through an increase in state employment and spending on social issues, housing and infrastructure,” it said. Cumulatively, government spending in GCC states has risen by between 30-60 percent since the onset of the global crisis in 2008.
