The Middle East region is expected to witness a GDP growth of 3.6 per cent in 2014 and 4.2 per cent in 2015, when compared with 2.6 per cent last year, according to Euler Hermes economic outlook report.
The Hot, Bright and Soft Spots report, which was officially released in Paris earlier this month, also expects GCC economies to grow at the same rate as the regional average or higher, largely driven by state spending.
“The combined assets held in Sovereign Wealth Funds (SWF) of GCC countries is estimated at approximately $2,250billion, with $975bn held by the UAE and $680bn by Saudi Arabia. The financial cushion provided by such reserves (of variable liquidity) allows GCC countries to boost domestic demand through state spending on infrastructure projects (thereby boosting jobs and future growth) and social spending (health, education and other welfare provision). Trade opportunities with the GCC region are, therefore, likely to remain relatively buoyant in the forecast period, even if global conditions are not supportive,” the report states.
It adds that GCC countries account for more than 29 per cent and 23 per cent of global oil and gas reserves, respectively: “Output from the hydrocarbon sector was a key driver of growth in the period from 2011 to date, when benchmark oil prices were $100 per barrel (or above). With a combined population of only 49 million, oil export revenues have enabled foreign exchange reserves to remain high and, in particular, the accumulation of financial assets held in SWF.”
The GCC region’s forecasted growth rate appears to be higher than some advanced economies, such as the UK and the US, which are predicted to grow by 2.4 per cent and 2.8 per cent, respectively.