JEDDAH — High oil prices and production will provide a supportive backdrop for another year of solid nonoil growth in the Gulf Cooperation Council (GCC), though the region's economic growth will slow in 2013 due to a moderation in oil production growth, Fitch Ratings forecast in its first quarterly “GCC Sovereign Credit Overview” released Thursday. Many governments in the region will continue to use high oil revenues to stimulate their economies. Fitch forecast that Qatar will remain the fastest growing of all GCC sovereigns in 2013, driven by the government's huge capital investment program. Growth will also be strong where fiscal stimulus is combined with healthy rates of bank lending and buoyant consumer and business confidence, as is the case in Saudi Arabia and Oman. GCC economies will remain heavily influenced by global oil markets. With conditions tight (low global spare capacity and little new output coming on-stream), Fitch expects Brent crude to average around $100 per barrel in 2013 despite the weak outlook for demand. As most GCC exporters aside from Saudi Arabia are operating at close to capacity, there is little scope to raise output after the hikes over 2011 and 2012, it noted. For all GCC sovereigns apart from Bahrain, fiscal and current account surpluses are anticipated, further strengthening sovereign balance sheets and external positions. Fitch expects the benign global inflationary environment to be sufficient to offset most domestically-driven price pressures and keep inflation in the region relatively subdued. Fitch believes the key challenges facing the region are economic diversification, rising breakeven oil prices, unemployment and accountability. — SG/Agencies
