As 2012 fades away, we can say that the global economic highlights of the year were the reelection of Obama as US president, solid regional expenses and logically soaring oil prices. The economic strength of the Gulf region showed upswing performance during the past 12 months, despite the crippling global recession and the turmoil in the area.
GCC introduced well-structured recovery policies, which proved effective and at the moment they are still supporting the region.
The Kingdom of Saudi Arabia was the first Gulf country to show signs of economic rejuvenation. UAE on the other hand managed to achieve solid recovery in economic activities, mostly to Dubai. The export service-based sectors in Dubai were the major diver for the economic rebound in the country.
The large-scale state frenzy of infrastructure expenses in the region were supported by the solid rise in oil prices. Basically, this came as a cushion to the strides that brought the Arab Spring. In respond, governments across the region started caring more about people and enhanced social policies to raise wages, offer better labor conditions, add new working places, lower housing rates, and improve education in order to ease the tension growing among masses.
These measures are not enough to sustain the peace in the region. Iran still doesn’t respect the world request to abandon its nuclear power projects. This situation in Syria also calls for attention due to the cumulative unrest. When a country’s population is showing rebellious attitude toward rulers, their political strategy needs to be reconsiders and corrections have to be executed in order to stabilize the outlook for 2013.
Experts say that the reelection of Barack Obama as US President is a positive driver for the GGC economies. On the contrary, many expected negative consequences for the Gulf region if the Republican candidate Mitt Romney won the presidency battle.
President Obama’s monetary stimulus policy is likely to continue trough the current mandate, supporting the local currency as it gains strength on weaker dollar backdrop. The World Economic Outlook release shows a 3.3% global growth during 2012 and 3.6% in 2013. The statistic numbers for GCC are the impressive 5.5% for 2012 followed by 3.7% next year. Though, this outlook is based on two conditions with unstable character. The projection expects European Financial Ministers to recognize policies which will benefit weaker economies. Also, the Congress and President Obama have to negotiate a way to avoid the automatic tax increases and severe spending cuts known as the fiscal cliff. In addition, US legislators have to increase the limit of federal debt for a long period.
Market expert share an opinion that resession within the developed economies, the US fiscal cliff, the Euro debt crisis and regional tensions are significant factors for the global economic development that have to be carefully observed and examined.
Now that is certain who the US President is, it is clearer that Obama can easily evolve the political stance toward the Middle East, adding firmness to the relationship. In respect, the foreign trade is expected to benefit as the volatility of oil prices decreases. But the outcome is yet clear, weighting on the US progress over the Iran and Syrian issues and the prospective sympathy toward Israel.
In 2011, the GCC political forecast has turned drastically due to the Arab Spring events across the region. Yet, in the short-term the outlook for the Middle East is optimistic with stable prospective.
Budget expanding policies and nonrestrictive monetary setting are in support of stable economic growth in the Gulf region. Oil prices are likely to keep the current rate of more than $100 per barrel in 2013 or rise even rise slightly. The soaring prices and the raising demand prompts significant government spending aimed at giving back to the continuously growing communities. Yet, the most important task for GCC governments is to create more jobs to satisfy the growing labor demand of the young and rising population. Also, the government wage expenditure is a sign that the financial threshold prices have grown faster than the oil price itself. This tendency is expected to continue.
Introducing new more efficient ways of handling infrastructure habits will be another great challenge for GCC governments. The execution of massive state-based development projects has to be reconsidered. Large-scale infrastructure projects need well trained managers that could complete it in medium term.
United Arab Emirates
During 2012 UAE has improved its macroeconomic climate, as well as the institutional patterns. According to the World Economic Forum report on global competitiveness, the country climbed 3 steps in rank to sit at the 24th place.
UAE has strong foreign trade relations and open economy, therefore the country is more exposed to the crippled global growth setting. Therefore, statistics project that UAE will show growth up to over 3% by the end of this year. The gain is supported by high levels of oil production and solid growth in non-petrol sectors.
Saudi Arabia
Saudi Arabia’s government has finally passed the long-expected mortgage law. The delayed law guarantees transparent regulatory setting to support completely operational mortgage market. In 2012, the country recognized for the first time properly functioning market.
On year over year measurement basis, oil production in Saudi Arabia showed a 6.1% growth. Non-petrol growth was backed up by billion worth of dollar state expenditure for social sector remuneration and infrastructure development projects. This year Saudi Arabia’s GDP is expected to reach 5.8% and the prospective is 4.5% for the upcoming 2013.
Qatar
Saudi Arabia has proposed a union of the six Gulf countries to Qatar this May. The government showed worries that this proposal could endanger the sovereignty of Qatar as the Kingdom of Saudi Arabia.
Qatar GDP is expected to reach a 6.7% growth till the end of 2012. The rebound is based on self-imposed moratorium on hydrocarbon output. Exactly the hydrocarbon sector will be main driver for GDP gain in 2012, though not as much in last year’s performance.
Kuwait
Kuwait’s Constitutional Court passed regulation in July. The outcome was that the elections of parliament taken place in February were found unconstitutional. In respect the National Assembly as dissolved and the former parliament rose back in power.
The 2012 economic growth of Kuwait is expected to be sitting at the stable 6%. The growth comes on back of the oil sector. The oil production in 2012 has touched a high level of 3 million barrels output for a single day.
Bahrain
In Middle Eastern investment managing ranking, Doha has climbed up the ladder, taking places in top 3 locations. Ahead are only Dubai and London. The competition between Doha and Dubai will push Bahrain’s position upward as a good regional financial centre.
Bahrain has to make quick strategic moves in order to break the political chains holding it down.
In the second quarter of 2012 the country showed 4.3% gain in GDP. The best performer for the GDP growth comes from the hospitality sector. Since the political problems in 2011 the hospitality sector in Bahrain gets more ground.
Oman
The new budget framework for 2012 opened 36,000 vacant working places. Last year about 44,000 employment positions were being created by the government.
During 2012 the economy in Oman was supported by the high levels of oil output and increase in budget expenditure. On year over year basis, in August oil production gained by 4%. In the first half of 2012 fiscal spending rose by 52%. According to the latest statistics the economy in Oman will show a 5.2% growth by the end of 2012.
