| 20 Nov 2009 |
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'GCC to witness 4% GDP growth in 2010'
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MANAMA: In its latest economic forecast HSBC put the inflation in Saudi Arabia at six percent in 2010, up from the current 3.5 percent. The overall GDP growth for the six-nation Gulf Cooperation Council is to reach a modest four percent, the report added.
David Bloom, global head of foreign exchange strategy at HSBC and Simon Williams, its chief economist for gulf markets, said the region faced its biggest challenge in years but that investor appetite was returning after state intervention and recovering crude prices.
Bloom during an annual event of the HSBC said the region not only appears to have braved the downturn but it also was well on the road to recovery. The members of the business community in Bahrain attended the briefing on outlook on the regional growth in 2010. But, he said, the region's recovery was fraught with downside risks, particularly slowing down of credit growth. As 2010 progresses, he added, the risk that regional economies will once again run too hot and that inflation will return looms large.
This year, the economies of Saudi Arabia, United Arab Emirates, and Kuwait had contracted drastically and unemployment was on the rise.
The region's inflation was in the range of one percent to two percent at present.
Bloom said the continuation of the dollar peg would keep policy rates at close to zero for anther two years. With time, he added, this could trigger a rapid acceleration in credit demand and a sharp rise in consumer and asset priced inflation.
He said a sharp fall in dollar value over the year could also add to the region's inflationary difficulties given its reliance on imported goods.
He said although the region had weathered the global recession, the Gulf economies have decelerated more sharply than much of Asia and also have been slower to receiver.
Per capita GDP is likely to drop by an average 17 percent.
Sharply increased provisioning levels on bank balance sheets clearly show the depth of macro economic distress. Equity markets had fallen 75 percent at their mid-year low point, destroying in a few months the market valuation gains of the last five years.
© Arab News 2009
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