Economic Insight: Middle East is produced by Cebr (The Centre for Economics and Business Research), ICAEW’s partner and economic adviser. The report provides ICAEW’s 140,000 members with a current snapshot of the region’s economic performance. The Economic Insight undertakes a quarterly review of the Middle East focussing on the Gulf Cooperation Council (GCC) member countries (United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait), as well as Egypt, Iran, Iraq, Jordan and Lebanon (abbreviated to GCC+5).
The report shows that the UAE and Qatar have experienced a ‘remarkable period of growth’ and established leading financial centres, making great strides in diversifying both the wider economy and energy production. However, it cautions that huge population increases and energy-intensive industry mean energy consumption is growing faster than production, a problem which is being distorted by energy subsidies. The report states that reducing energy subsidies, diversifying energy sources and investing in competitiveness are vital in order for long term growth.
Charles Davis, Head of Macro-economics at Cebr and ICAEW’s economic adviser, said, “Booming populations mean energy demand is increasing, whilst energy subsidies are distorting that demand even further. Fuel and electricity are very cheap across the Middle East, partly thanks to subsidies. But money spend on subsidies can’t be spent on improving competitiveness. Also, it can result in inefficient processes, like generating electricity using oil, which has been abandoned elsewhere because it is too expensive. Ironically, oil and gas production is itself energy intensive, which is exacerbating the problem. Abu Dhabi, Dubai and Qatar stand out from the region as a whole for their efforts in diversification, but more will need to be done to safeguard prosperity in the long term.”
Peter Beynon, Regional Director, ICAEW Middle East, said, “The UAE has seen great leaps forward in diversification, with financial services, first class infrastructure, and tourism all delivering economic growth that is not directly reliant on oil. However, more investment is needed in ‘human capital’; ensuring the growing population has the skills needed to grow the economy and to attract people to do business here. The private sector must be allowed to flourish in order to make sure that growth is sustainable in the longer term.”
Wednesday, May 29- 2013 @ 12:48 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.