GCC GDP expected at 5.5%; Inflation in control

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· GDP growth in GCC expected at 5.5% and 3.7% in 2012 & 2013 respectively
· Public debt to GDP ratio to decline to 11.4% in 2013 compared to 11.8% in 2012
· GCC exports rose by 6.8% and imports by 8.5% in 2012
· Inflation stays in control despite healthy growth in money supply

GDP growth in GCC expected at 5.5% and 3.7% in 2012 & 2013 respectively
The GDP growth in GCC countries is expected to be at 5.5% in 2012 benefitting from high oil revenues, led by higher oil production in Saudi Arabia and Kuwait to compensate for the low supply from Iran. GCC economies are anticipated to expand by 3.7% in 2013. The oil sector growth in GCC countries is anticipated to increase 4.8% in 2012. Meanwhile, the non-oil sector is expected to increase 5.9% for the same year. Going forward, the non-oil sector is expected to continue supporting economic growth, as GCC countries register 5.5% growth in the non-oil sector vis-à-vis no growth in the oil sector in 2013.

Public debt to GDP ratio to decline to 11.4% in 2013 compared to 11.8% in 2012
GCC economies are expected to marginally lower their public debt, as they continue to direct their surplus oil payouts to meet social expenditures. GCC countries’ public debt–to-GDP ratio is expected to decline to 11.8% in 2012 and to 11.4% in 2013, from 12.1% in 2011. International reserves held by the GCC countries are expected to increase 29.2% to USD815.1bn in 2012; it is anticipated to grow 19.5% to USD974.2bn in 2013.

GCC exports rose by 6.8% and imports by 8.5% in 2012
Exports by GCC countries increased by 39.2% in 2011, while imports rose 17.8%. Consequently, current account surplus rose to 24.1% of GDP in 2011, up from 14.4% in 2010. Total exports by GCC countries are expected to remain high in 2012, as exports increase 6.8% and imports rise at 8.5% in 2012. Meanwhile, current account surplus is expected to stabilize at 23.6% of GDP in 2012, and further declining to 21.1% as oil exports increase at a reasonable rate.

Inflation stays in control despite healthy growth in money supply
GCC countries have largely remained immune to rising prices as inflation is expected to decline slightly to 3.5% in 2012 from 3.6% in 2011. Monetary growth has been slower than reserve accumulation in the GCC countries, which has kept inflation in check, despite public sector wage increases and direct food subsidies. Hence, inflation in the GCC countries is expected to remain low (3.6%) in 2013. GCC countries reined in money supply in an effort to keep inflation under control.

GCC corporate earnings grew 4.5%YoY in 2012
Corporate earnings in the GCC region continued to rise in 2012, albeit at a slower pace when compared to 2011. Overall corporate earnings grew 4.5%YoY to USD55.4bn in 2012. UAE continued its strong performance from 2011, rising 28.8%YoY in 2012 driven primarily on account of recovery in Real Estate sector. Saudi Arabia’s earnings on the other hand remained at similar levels to 2011 impacted by weak performance of the petrochemical sector. Among other gainers were Kuwait and Oman which grew 12.0%YoY and 14.3%YoY, respectively.

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