Decisive year for Gulf states: Report
The Peninsula
Jan-12-2010
The powerful cyclical recovery triggered in the second half of 2009 by unconventional monetary policies and fiscal policy stimuli should continue into first quarter of 2010. Nonetheless, this economic recovery will peter out in second half of 2010.
The recovery will only turn into a sustained upswing in 2011, with the support of further fiscal stimulus. This is the conclusion of the latest report on the economic outlook, Global View, published by Bank Sarasin’s Research team for first quarter 2010.
While the year 2008 conveyed the impression that there is no limit to GCC growth thanks to surging oil prices and GCC’s ambitious efforts to diversify from oil, the year 2009 brought two heavy dampeners for the region. First oil prices temporarily fell to $ 35 per barrel (down from $ 145 in mid-2008) and secondly Dubai World, the most prestigious project in the region, appeared to nearly default. 2010 will be not only a decisive year for the global economy, but in particular for the GCC.
Though Sarasin’s outlook for Dubai is on the cautious side it is more optimistic for the region as whole. One has to keep in mind that Dubai only adds 10 percent to GCC’s gross domestic product, while the lion’s share of around 45 percent comes from Saudi-Arabia.
The major driver for GCC GDP growth remains the evolution of the oil price. Sarasin expects oil prices to overshoot Sarasin’s estimated medium-term price band of $ 75 to $ 85 per barrel in the first half of the year as the current global recovery fuels demand for oil.
However, in the second half of the year Sarasin sees oil prices dropping slightly below the mentioned price band due to the global cooling towards the end of 2010. This in turn bodes well for the region in first half of this year, but points to a slight downturn in this year’s second half.
On the one hand, Sarasin would expect some capital outflows due to a rise in risk aversion, on the other hand oil prices could jump, which in terms of GDP growth could partly offset the first effect. Macro and micro risks within GCC may dampen investor’s risk appetite for the region in 2010. Sarasin is cautious for emerging markets as a whole and think that the potential for stock markets in the GCC region is limited.
The heavy weighting of the financial sector is a clear negative for the region. However, a consolidation for equity markets in 2010 may set the stage for a more broad based and sustainable recovery in 2011.
The Peninsula
Jan-12-2010
The powerful cyclical recovery triggered in the second half of 2009 by unconventional monetary policies and fiscal policy stimuli should continue into first quarter of 2010. Nonetheless, this economic recovery will peter out in second half of 2010.
The recovery will only turn into a sustained upswing in 2011, with the support of further fiscal stimulus. This is the conclusion of the latest report on the economic outlook, Global View, published by Bank Sarasin’s Research team for first quarter 2010.
While the year 2008 conveyed the impression that there is no limit to GCC growth thanks to surging oil prices and GCC’s ambitious efforts to diversify from oil, the year 2009 brought two heavy dampeners for the region. First oil prices temporarily fell to $ 35 per barrel (down from $ 145 in mid-2008) and secondly Dubai World, the most prestigious project in the region, appeared to nearly default. 2010 will be not only a decisive year for the global economy, but in particular for the GCC.
Though Sarasin’s outlook for Dubai is on the cautious side it is more optimistic for the region as whole. One has to keep in mind that Dubai only adds 10 percent to GCC’s gross domestic product, while the lion’s share of around 45 percent comes from Saudi-Arabia.
The major driver for GCC GDP growth remains the evolution of the oil price. Sarasin expects oil prices to overshoot Sarasin’s estimated medium-term price band of $ 75 to $ 85 per barrel in the first half of the year as the current global recovery fuels demand for oil.
However, in the second half of the year Sarasin sees oil prices dropping slightly below the mentioned price band due to the global cooling towards the end of 2010. This in turn bodes well for the region in first half of this year, but points to a slight downturn in this year’s second half.
On the one hand, Sarasin would expect some capital outflows due to a rise in risk aversion, on the other hand oil prices could jump, which in terms of GDP growth could partly offset the first effect. Macro and micro risks within GCC may dampen investor’s risk appetite for the region in 2010. Sarasin is cautious for emerging markets as a whole and think that the potential for stock markets in the GCC region is limited.
The heavy weighting of the financial sector is a clear negative for the region. However, a consolidation for equity markets in 2010 may set the stage for a more broad based and sustainable recovery in 2011.