Gulf foreign trade likely to fall victim to weak oil prices

Riyadh: Members of the Gulf Cooperation Council (GCC) will face challenges on several economic fronts as a result of falling oil prices, a senior official has warned.

"Prominent among these challenges will be the decrease in the foreign trade following the huge fall in crude prices, the main source of revenue for most GCC states," said Dr Abdul Aziz Al Owaisheq, Minister Commissioner and Director of the Department of Economic Integration and Studies at the General Secretariat of the GCC.

Al Owaisheq, however, saw some positive signals like the further opening up of the Saudi economy and formation of new economic blocs.

"The volume of GCC foreign trade exceeded $800 billion in 2008. This figure has almost doubled in the last five years. The volume of foreign trade was about $400 billion in 2003," he noted.

Al Owaisheq attributed the huge increase in the volume of foreign trade mainly to the rise in oil prices during the period, in addition to serious efforts to raise the volume of non-oil exports.

"There has been a 25 per cent increase in the volume of non-oil exports in 2007 alone," he observed.

"The trade balance that represents the difference between exports and imports has been in favour of the GCC states for several years, he said, adding that the volume of trade between GCC states reached $300 billion in 2007.

But revenues in GCC states are likely to be affected by weak oil prices.

"If the fall in the prices of oil continues for some time, it will hit the revenues of the GCC states considerably in 2009. "There may not be a decrease in the volume of exports of non-petroleum products, but most of the petrochemical products that are based on oil will be hit," he said.

According to Al Owaisheq, the European Union is the region's largest trading partner, with volume of trade represented 25 per cent.

It is followed by China, the US and Japan, ranging between 10 and 12 per cent. The GCC is making efforts to enhance trade tieswith countries such as Japan, China, Singapore and Turkey.