Hydrocarbons Remain Driver in GCC Countries, but Infrastructure Development Secures Future

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Hydrocarbons will remain key drivers in the Gulf Cooperation Council (GCC) countries, as efforts will continue to be made to move up the value chain while exploring potential new fields, reports Standard Charter (SC) in its Middle East North Africa (MENA) Focus. The GCC countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

The GDP growth forecast for the region for 2012 has been increased to 3.4% from 2.4% for the UAE and to 4.7% from 2.9% for Saudi Arabia, as both countries are able to export more oil at higher prices. High oil prices are having a direct impact on growth and a more important indirect impact by enabling investments in key infrastructure projects and social programs, SC reports. Investments in infrastructure can have a longer-term impact on growth by improving productivity.

Qatar should see headline growth slump to single figures, but this is seen as good news, as key infrastructure projects in the non-oil part of the economy will begin to play a more important role in driving growth, with the organization of the 2022 World Soccer Cup tournament as a catalyst.

Qatar has $26 billion of projects open to tender in the remaining three quarters of 2012, which represent a 153% increase from the same period in 2011.

As the world's largest producer of LNG, Qatar is close to performing at its maximum capacity, with an estimated production of 77 million tons in 2012, which represents a 3% increase from 2011. While oil and gas production will support the nation's development, it is likely that other sectors can offer greater potential rates of growth.

Although Kuwait is benefiting from higher oil prices, implementing ambitious spending plans included in this year's budget should prove to be a challenge again. Even though revenues overshoot, spending leading to a significant fiscal surplus, this does little to help Kuwait's non-oil infrastructure.

Oman is in a good position with low indebtedness, higher oil revenues and a focus on Eastern markets for exports. Although the outlook is positive, over-reliance on the government sector for job creation could present future challenges.

Bahrain, with the importance of its services sector, must watch social stability when it comes to improving sentiment and economic stability. Growth is expected to rebound this year.

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