Positive economic outlook for Gulf countries

Dubai: Short to medium term economic outlook of GCC countries is positive due to strong external balances and rising oil prices, but these economies should watch out for potential fiscal imbalances creeping in as a result of the excessive public spending and the rising budget break even oil prices, the International Monetary Fund said on Wednesday.

In 2012, GCC's GDP growth is projected to average almost 5 per cent, as oil prices are expected to average about $115 per barrel. While the real GDP of Kuwait, Saudi Arabia and Qatar are projected to grow more than 6 per cent, the UAE and Bahrain are projected to grow at 2.3 per cent and 2 per cent respectively.

"Last year GCC countries benefited from high oil prices, and generally shrugged off the impact of the global slowdown induced by the euro area crisis. In the GCC the average real GDP growth reached 8 per cent. In 2012 too, the outlook appears positive on high oil prices," said Masood Ahmed, Director of the IMF's Middle East and Central Asia Department.

Aided by higher oil prices, the GCC's combined current account surplus reahed $400 billion in 2011, almost double the 2010 level. This increase helped lift their official reserve position above the $1 trillion mark, the IMF said.

Non-oil GDP growth is also expected to rise in all GCC countries. On aggregate, non-oil GDP growth is projected to accelerate to almost 4.5 percent in 2012, largely on the back of heightened construction activity as increased government spending takes effect. As a result, non-oil GDP is expected to be around three-quarters of overall GDP growth by 2013.