The GCC economic growth pace is expected to slow down in 2013 (4 percent) and 2014 (4.3 percent) though it posted strong economic growth in 2011 (7.2 percent) and 2012 (6 percent).
Highlighting the global economic trends, trade development and the key role played by the GCC countries in the international markets, Ludovic Subran, chief economist at Euler Hermes, noted that Saudi Arabia and the UAE are expected to grow by 4 percent and 3.5 percent respectively in 2013, and 4.5 percent and 4 percent respectively in 2014.
“World GDP growth by year-end will be lower than earlier forecast – at 2.2 percent – due to euro zone contractions (-0.5 percent). There will be moderate growth in emerging countries (4.4 percent). GCC countries, having experienced two years of sustained economic growth, are expected to slow down to 4 percent in 2013 mainly due to the global demand slowdown (2.2 percent in 2013). A global and delayed recovery is expected in 2014 (3.1 percent). However, the overall growth deceleration will increase the momentum of global insolvencies (8 percent in 2013; 2 percent in 2014),” Subran said during the inaugural Trade Credit Insurance Summit under way in Dubai.
Presenting the preliminary results of the Euler Hermes International Trade Observatory, focused on Mediterranean and GCC economies, he said that the financial fundamentals, including current account surplus, fiscal balance and large foreign exchange reserves, remain satisfactory.
“GCC countries, with a strategic position as major global oil exporters, benefit from a strong commercial and budgetary position,” Subran added.
“The expected oil production decline in 2013, driven by lower US demand due to the development of shale gas and China’s slowing growth, will involve a slight budget surplus decrease, which should be partially offset by an increase in nonoil exports,” he said.
In Saudi Arabia, the public spending will underpin 2013 and 2014 economic growth. The current five-year plan (2010-2014) aims at developing and improving infrastructure and investing in human capital through education and training.
In addition, following the Arab Spring events of 2011, the government announced two major programs to support housing and job creation.
In the UAE, significant progress has already been made in infrastructure development and improved business climate, but much remains to be done in education.
He also explained the ongoing diversification of the GCC economies and business partners.
For over a decade, GCC countries have made significant efforts to diversify their economies to reduce dependence on petroleum products.
Saudi Arabia’s share related to oil in total GDP decreased from 34 percent in 2000 to 21 percent in 2012, and declined from 47 percent to 33 percent in the UAE.