Gulf economies to grow 5% in 2010 on oil price rise: IMF

Gulf economies to grow 5% in 2010 on oil price rise: IMF
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First Published: Sun, Oct 11 2009. 08 51 PM IST
Updated: Sun, Oct 11 2009. 08 51 PM IST
Dubai: Gulf Arab economies will grow 5.2% next year as oil prices rise, credit markets improve and the property industry stabilizes, the International Monetary Fund (IMF) said.
The growth forecast for Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Qatar, Bahrain and Oman is based on an average oil price of $76.5 (Rs3,557) a barrel in 2010, the Washington-based IMF said on Sunday in its regional economic outlook for West Asia.
Crude prices have increased to about $71 a barrel from a five-year low of $32.40 a barrel in December. Countries in the oil-rich Gulf region faced economic contractions this year after crude prices plummeted from last year’s July peak of $147.27. Real estate markets in the region slowed, most notably in Dubai where house prices halved, and businesses struggled to refinance loans as credit markets tightened.
The external environment is gradually improving: Oil prices are rising, external financing conditions are easing, and an incipient global recovery is under way, IMF said.
IMF urged the states to develop local bond markets to ease reliance on bank financing. Islamic banks are better- positioned to withstand credit shocks, according to the report.
IMF said the ratio of non-performing loans to total gross loans was 3.1% last year in Kuwait, the highest level among the Gulf Arab states. The ratio in Saudi Arabia was 1.% and 2.5% in the UAE.
“Gulf Arab oil exporters need to continue with public spending next year because we’re not out of the woods,” said Masood Ahmed, IMF’s Middle East and Central Asia department director, at a conference in Dubai on Sunday.
Economic growth excluding oil income in the wider region, which includes Iraq, Iran and North African crude exporters, will be 3.2% this year, according to the report. In 2010, the oil and non-oil segments of those economies are expected to grow about 4%, IMF said.
“Emerging markets will be the engine of growth for global recovery and the region will benefit from an increasing reliance on Asia for expansion,” Nasser Saidi, chief economist at the Dubai International Financial Centre said at the conference. “This is not the time to stop stimuli.”
IMF said lending conditions remain tight in the wake of the global financial crisis and the failure of some companies in the region. Saudi Arabia’s Saad Group and Ahmad Hamad Algosaibi and Brothers Co. are restructuring their debt after defaulting on payments.
Private sector credit has remained sluggish in some countries, reflecting increased risk aversion, difficulties in raising sufficient capital and increased supervisory scrutiny, IMF said. It could also reflect concerns about the recent credit problems faced by large family businesses in the Gulf Cooperation Council, and an expected deterioration in asset quality.
Anthony DiPaola contributed to this story.
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First Published: Sun, Oct 11 2009. 08 51 PM IST
More Topics: Gulf economies | Oil | Price | IMF | Saudi Arabia |