Growth hopes worsen for UAE, Qatar, Saudi

The world's tallest tower Burj Khalifa casts its shadow over Dubai on January 4, 2010. The UAE is seen growing 2.1 percent this year, the slowest pace in the Gulf. Photograph: AFP

Arab GDP growth seen rising to 4 pct in 2010



IIF expects 4.4 pct Gulf economic growth



DUBAI - Growth prospects for key Gulf Arab economies worsened slightly in 2010 as oil prices remain volatile following Europe's debt woes and credit growth stays low, a Reuters poll showed on Thursday.



While most economies will see their gross domestic products growing in low single digits, Qatar will keep expanding well ahead of the rest of the world's top oil exporting region.



The world's biggest liquefied natural gas (LNG) exporter will book a real GDP growth of 16.1 percent in 2010 on gas output rise and government spending, according to the median forecast of economists polled between June 10-17.



This is unchanged from the previous Reuters poll in April, while the IMF has forecast 18.5 percent growth.



High government spending, unlike in the rest of the world, should keep supporting the six Gulf oil exporters, but volatile oil prices and sluggish credit growth are seen taking a toll.



"Volatility and uncertainty globally and oil prices, which have fallen to $63 a barrel in a matter of weeks, were important factors. Now, they have recovered but the sentiment is increasingly volatile," said John Sfakianakis, chief economist at Banque Saudi Fransi Credit Agricole in Riyadh.



"The private sector is quite cautious in its outlook given the uncertainty in Europe and international banks continue to be highly risk averse," he said.



The latest poll is based on responses from 17 analysts.



Saudi Arabia, the top Arab economy and the world's biggest oil exporter, is seen growing 3.7 percent this year, below 3.9 percent seen in April, but up from 0.6 percent growth in 2009.



Kuwait's GDP should rise by 3.0 percent in 2010, a slower recovery than analysts saw in April and below the central bank's forecast of 4-5 percent growth. Non-OPEC Oman and Bahrain should see GDP up 4.0 and 3.1 percent, a small improvement from April.



UAE WEAKER



Outlook for the United Arab Emirates -- the second largest economy in the Arab world -- worsened again as banks hesitate to lend due to exposure to debt-laden Dubai state firms.



The UAE is seen growing 2.1 percent this year, the slowest pace in the Gulf, below 2.5 percent seen in April and at the lower end of the government prediction of 2.0-3.2 percent.



"There is still some uncertainty and risk aversion on the part of local banks about the possible further debt restructurings in the UAE, and this is one of the reasons why credit growth so far this year has been incredibly weak," said Khatija Haque, vice president at Shuaa Securities in Dubai.



The UAE economy, the world's third largest oil exporter, grew by 1.3 percent in 2009 according to preliminary government data, although analysts have forecast a 1.4 percent contraction.



UAE banks are heavily exposed to Dubai World, which is yet to strike a deal with remaining creditors to restructure $23.5 billion of debt. The IMF put potential Dubai Holding restructuring at $14.8 billion.



INFLATION SEEN DOWN



Inflation was seen lower this year compared with April in most Gulf states on a firmer dollar, but analysts raised 2010 forecasts for the Saudi kingdom, where consumer price growth hit a one-year high in May.



"Inflation is more contained. I'm surprised with the strength in Saudi Arabia," said Giyas Gokkent, head of research at National Bank of Abu Dhabi.



Saudi Arabia should see the highest average inflation of 4.7 percent in 2010, still below record peaks of over 10 percent seen in most Gulf countries in 2008.



In contrast, Qatar and the UAE, which saw months of deflation in 2009, are likely to have the lowest consumer price growth at 1.7 percent and 1.8 percent, below April forecasts.



Oil prices, which have more than doubled since December 2008 lows, should keep most Gulf fiscal balances in surplus in 2010, although lower as crude expectations shifted.