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The expected growth of the Gulf economy in 2019

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The expected growth of the Gulf economy in 2019

Post by claud39 on Tue Jan 15, 2019 7:28 am

http://www.uabonline.org/en/news/arabicnews/23157516041606160516081575160416051578160816021593/59446/0


The expected growth of the Gulf economy in 2019




15/01/2019











The economic outlook for the Middle East and North Africa region is affected by uncertainty in the global economy and by the volatility of the financial markets. In the World Economic Outlook published in October 2018, the International Monetary Fund lowered the outlook for global economic growth by 0.2% Expected growth rates to 3.7% in the next two years with another possible reduction, given the risk that the risk balance might tilt to the downside.
The overall situation is dominated by the surge in trade protectionism raised by US-China tariff disputes, as well as the tightening of US monetary policy as the US Federal Reserve raises rates four times in 2018 by 25 points And the implications for the economies of emerging markets and countries with dollar-linked currencies, which suffer from the outflow of capital flows and rising borrowing costs.
A report by the National Bank of Kuwait (NBK) confirmed that uncertainty about the political situation in some advanced economies was further complicating the overall situation. From the administration of US President Donald Trump to the partial closure of the government and the possible escalation of the legislative situation in Congress under the control of Democrats, through the problem of the secession of the United Kingdom from the European Union and the face of French President Emmanuel Macaron from the pressure of protests, the so-called "yellow jackets" that swept the streets Which led him to reverse the recent increase in taxes. All these events contributed to a bad end of 2018.
Global financial markets suffered losses at the end of the last quarter of 2018, with the Standard & Poor's 500 and Morgan Stanley Emerging Markets falling by 6.2 and 12.3% respectively. On the other hand, GCC markets performed better compared to their global peers. The Saudi market rose 8% and the Abu Dhabi market grew by 11.7%. 
Estimates of GCC growth prospects suggest that the projected decline in oil prices for the years 2019-2020, combined with reduced production, will delay fiscal balance, resulting in additional pressures on non-oil sectors to drive revenue growth and real GDP growth. On the other hand, regional governments will continue their development plans and ambitious infrastructure projects, supported by expansion spending plans, most notably the Saudi budget of 1.1 trillion riyals ($ 293 billion) for 2019.
On the other hand, the report said that private sector stimulus programs and investment in infrastructure will contribute to support non-oil growth significantly during the forecast period. In addition, many reforms have been introduced to stimulate the business environment and provide incentives to attract long-term foreign investments, especially in the UAE, which have reduced fees in many sectors including tourism and real estate (Dubai) and allowed licenses for companies operating in free trade zones Abu Dhabi). At the federal level, visas for gifted and creative expatriates have been issued for up to 10 years and foreign ownership limits for companies operating outside the free trade areas have been increased from 49% to 100%. 
The report predicted that the pace of non-oil growth of the GCC will improve from 2.9% in 2018, to 3.3% in 2019 and 3.5% in 2020.
In terms of hydrocarbons, expansion plans for Gulf governments in the oil and gas sectors will continue in full swing despite OPEC's cutbacks in production and the possibility of a drop in oil prices. The UAE is nearing its maximum target capacity of 3.5 million barrels per day (bpd), allocating about $ 145 billion in new exploration and production investments over the next five years.
Bahrain has also started implementing its projects aimed at increasing its oil and gas production, after the discovery of huge quantities of marine oil and gas reserves. As for Kuwait, it intends to benefit from its production of non-associated gas and light condensate. In the third quarter of 2018, it sold the first shipment of light crude, which is not subject to the quota cut by OPEC and its allies. Production capacity will also rise as the $ 12 billion biofuel project approaches. 
Apart from oil prices, other risks to economic prospects are reflected in a slowdown in credit growth in an environment of rising borrowing costs associated with tightening US monetary policy and falling oil prices, with a negative impact on consumer confidence and consumer spending.
Overall, the report predicts that GCC countries will grow by 2.3% in 2019 and 2.6% in 2020, against a 2.4% growth forecast for 2018. 
In the meantime, inflation motivations seem to be constrained and burdened by falling real estate prices and rents, Continued weak demand. The introduction of value added tax in the UAE and Saudi Arabia in 2018 is the main reason for the rise in prices, but this effect has already disappeared and inflation is expected to rise by only 2.0% by 2020.

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