“Owing to the oil-driven economy, we expect real GDP growth to accelerate to 3.5% in 2012 from 1.9% in 2011. Growth in 2012 will be driven by strong oil production and a highly favourable base effect. Bahrain’s growth story is driven by hydrocarbons. The non-oil economy was still witnessing contraction in the third quarter of 2011,” Standard Chartered forecast, added.
The Standard Chartered report which covers all GCC States is based on the insights of Gerard Lyons, Chief Economist and Group Head of Global Research and Marios Maratheftis, Head of Research, Europe, Middle East, Africa and Americas, Standard Chartered.
“Bahrain has a large banking sector, by far the largest relative to the size of the economy among GCC countries, retail banks’ assets are equal to 300% of GDP, and wholesale banks assets are an additional 700% of GDP. The wholesale banking system contracted by around 14% in Q1-2011 but remained broadly stable in Q2 and Q3,” it said.
Growth will be sustained by Oman’s eighth five-year plan, which began in 2011 and is part of a longer-term goal of diversifying away from oil. The bulk of spending under the plan will go to infrastructure (approximately 70% of the total), followed by social spending, which includes education and health care. Oman’s 2012 budget envisages a 25% year on year rise in expenditure. Spending on current consumption (mainly via higher wages) will need to be balanced by spending on infrastructure, in line with the five-year plan. This would help to generate longer-term growth. Spending will continue to be buoyed by higher oil prices, which we expect to average above $100/bbl in 2012. Oman’s greatest vulnerability stems from its over-reliance on oil revenue (which, together with gas, makes up 80% of government revenue). The breakeven price required to balance the budget has risen: the 2012 budget sees a breakeven oil price of $75/bbl, up from $58/bbl in 2011.We expect the budget deficit to turn to a surplus in 2012 on the back of higher than budgeted oil revenue. We also expect Oman to post a fiscal surplus for 2011 due to higher oil prices.
2012 marks a significant inflection point for Qatar. We forecast that the emirate’s real GDP growth will moderate to 5.9% in 2012, from an estimated 16.9% in 2011. Qatar is likely to meet its target level for liquefied natural gas (LNG) output around year-end 2011, leaving little room for LNG to remain the key driver of super-charged economic growth rates (as it has been for the last seven years) in 2012. Even though growth is likely to slow, the real economy will probably play a much more important role. 2012 should mark the next phase of Qatar’s growth, marked by higher-quality growth driven by activity in the non-oil and gas sectors.
In 2012, LNG infrastructure will allow production of close to 77mt/year, making Qatar the world’s largest exporter of LNG. Global consumption of LNG increased to 3.2trn cubic feet in 2010 from 2.4trn cubic feet in 2000, according to the BP Statistical Review of Energy; this points to bright export prospects. Increasingly, Qatar’s gas customers are from Asia, Asia’s demand for gas has almost doubled over the last decade.
“We expect investment in the non-oil and gas sectors to pick up significantly in 2012 as the country gears up to host the FIFA 2022 World Cup. We estimate that close to $107billion of projects are in the pipeline as Qatar begins to prepare for the World Cup. Most of the investments are infrastructure-related. The transport sector will receive close to $44billion of spending, $25billion for a fully integrated rail system, and about $12billion will be invested in accommodation facilities. The 12 stadiums that will host the games will be built at an estimated cost of $4billion.
The economy boomed in 2011 on increased hydrocarbon output (to compensate for loss of output from Libya) and higher government spending after new social spending packages announced in the first quarter of 2011. “We expect growth in 2012 to moderate to a lower but still healthy level of 2.9%, with the key driver of growth being the robust pace of government spending. However, lower oil output in 2012 will detract from growth. The commitment to spend close to USD 128bn on social subsidies (boosting social security) and projects (building 500,000 housing units) will continue to drive headline growth in 2012 and into 2013. This is in addition to budgeted spending commitments in 2012, which are expected to continue moving ahead at the strong pace seen in Saudi budgets since 2008. Housing supply will be a key challenge for policy makers in 2012 and beyond, though steps are being taken to address this challenge. Saudi Arabia is well placed to deal with oil-market outages, as it did in 2011 when it raised production to compensate for output shortages from Libya,” the report added.
“We estimate that Saudi Arabia’s oil output reached 9.29mbd in 2011, against our 2010 estimate of 8.28mbd – an 11% increase. We estimate that 2012 output will fall to 8.42mbd as Libya gradually raises output to 1.06mbd from 0.45mbd in 2011. Government expenditure will continue to be an important driver of economic growth in 2012. We estimate that a total of $159billion worth of projects will be awarded in 2012 by the government and, to a lesser extent, the private sector. Infrastructure and construction projects will dominate, at $44.6billion and $39billion, respectively. Saudi Arabia plans to award projects worth about $67billion related to the construction of 500,000 housing units, this is part of the $128billion worth of social spending announced in 2011.