GDP growth in the GCC region is expected to improve in 2014 after seeing healthy growth in 2013. Economic activity in the region is expected to strengthen in the near term as some of the recent initiatives to diversify the economy start showing results in addition to the gradual economic recovery of GCC trading partners. Further, as a sign of confidence, the IMF upgraded its 2014 GDP growth forecast for Saudi Arabia during July 2014, the region’s largest economy, to 4.6% from its previous forecast of 4.1% on the back of stronger than expected growth in the private sector.
Inflation though not a major concern for the GCC market, but, the regulators are actively managing price levels with the help of policies targeting specific sectors. Inflation rates for the GCC ranged between 1.2% and 3.0% on an annual basis at end of Q2-2014, the highest inflation numbers was recorded in Kuwait at 3.0% followed by Qatar at 2.8%, while the inflation rate for the GCC’s largest economy, Saudi Arabia, stood at 2.7%. The price rise is generally highest for the real estate, food and furniture.
Kuwait
Credit facilities extended by Kuwaiti banks during Q2-14 continued with the upward momentum seen during last year to record a quarterly growth of 2.34% and stand at KWD 30.24 Bn at the end of June-2014. Personal facilities and credit to the real estate sector are the main drivers behind the growth in total credit, together adding around KWD 551 Mn or around 80% of the total credit growth in Q2-14. Growth rate in Personal Facilities nearly maintained the same level compared to last period to post an increase of 2.8% during Q2-14. As well, credit to real estate sector has jumped by around 3% in Q2-14 as compared to a marginal growth of 0.8% in Q1-14.
Despite the conservative lending policies and low appetite by banks to extend credit, along with the restructuring of corporate debt and the ongoing delay in implementing a dozen of infrastructure and economic projects, the credit market has witnessed signs of recovery in 2013 and Q1-14 that will most likely continue through 2014 driven by the gradual restoration of confidence in the private sector & the recovery of the property market and the local bourse. Kuwait’s broad measure of money supply (M2) increased for the 3rd consecutive quarter in a row, albeit at a decreasing rates, to add around KWD 518 Mn or 1.5% in Q2-14 and to stand at KWD 34.3 Bn as of June-14. The rise in M2 is mainly attributed to the increase in the currency in circulation by 27.2% or KWD 404 Mn.
Saudi
Due to weak oil prices and low demand from OECD, the Saudi Oil Sector GDP reported a quarterly decline of 3.5% at the end of Q2-14 to stand at SAR 322 bn as compared to Q1-14. On the other hand, overall GDP growth for the same period ending June-14 decreased by 3.3%. The non-oil sector GDP contributed to around 54% of the overall GDP, also declining by 3.6% during the same period. Meanwhile, Private sector activity was evident from the robust manufacturing as highlighted by the HSBC PMI index that stood above 58 level for most of 2013/14. The broad measure of money supply (M2) in the Kingdom increased by 2.9% during Q2-14 to reach SAR1,450 bn after growing by 4.8% in Q1-14 driven by ample liquidity with banks and remarkable growth in deposits base and credit facilities.
UAE
UAE’s GDP had already surpassed pre-crisis level by 2011 when it reported a nominal GDP of USD 348.6 billion. According to the revised estimates from the IMF, UAE’s GDP grew by 3.2% during 2013 and is expected to post a stronger growth of 4.1% in 2014. In terms of budget allocations in UAE, the focus continues to remain on developing the non-oil sector in order to counter the expected weakness in the oil sector, which accounted for 1/3rd of the economy’s GDP. The non-oil sector is expected to get further boost from increased investment spending for the World Expo 2020, that will support tourism, hospitality and real estate sectors. Nevertheless, buoyant imports amid the development process would most likely have a negative impact on current account balance, as indicated by the IMF.
Qatar
As economic activity improved, demand for credit facilities in Qatar increased resulting in higher money supply and lending. The private sector continues to account for the lion’s share of lending, however, increased infrastructure investments has resulted in higher lending to the public sector. The country did see delays in project execution that also resulted in cost escalation; however, the government has recently accelerated work on infrastructure projects which will have a similar effect on the pace of credit growth. Qatar’s broad measure of money supply (M2) increased for the 3rd consecutive quarter in a row, albeit at a decreasing rates, to add around QAR 734 Mn or 0.15% in Q2-14 and to stand at QAR 484 Bn as of June-14. The rise in M2 is mainly attributed to the increase in the demand deposit by 8.3% or QAR 8.99 Bn.
Bahrain
Bahrain is expected to post above average growth in real GDP of 4.69% for 2014 as compared to other GCC economies. GDP during the second quarter of 2014 increased to BHD 3.2 Bn, a strong Q-o-Q growth of 4.12% as compared to BHD 3.1 Bn seen during the first quarter of the year. Further, both the components of the GDP, i.e. the oil and the non-oil sector, witnessed strong improvement during the quarter. Oil GDP improved by a strong 7.9% from BHD 796.7 Mn during Q1-14 to BHD 859.7 Mn during Q2-14.
Oman
Oman’s finances further strengthened during the second quarter of 2014 as it reported higher quarterly revenues of OMR 4.0 Bn as compared to OMR 3.2 Bn during Q1-14, an significant growth of 23.8%. However, the increase in expenditure was even higher at 31.6% as it increased from OMR 3.0 Bn to OMR 3.9 Bn, offsetting most of the growth in revenues. The steep increase in expenditure also affected quarterly fiscal surplus that declined by 83.9% Q-o-Q to OMR 34.7 Mn as of Q2-14 as compared to OMR 215.4 Mn at the end of Q1-14.
Inflation though not a major concern for the GCC market, but, the regulators are actively managing price levels with the help of policies targeting specific sectors. Inflation rates for the GCC ranged between 1.2% and 3.0% on an annual basis at end of Q2-2014, the highest inflation numbers was recorded in Kuwait at 3.0% followed by Qatar at 2.8%, while the inflation rate for the GCC’s largest economy, Saudi Arabia, stood at 2.7%. The price rise is generally highest for the real estate, food and furniture.
Kuwait
Credit facilities extended by Kuwaiti banks during Q2-14 continued with the upward momentum seen during last year to record a quarterly growth of 2.34% and stand at KWD 30.24 Bn at the end of June-2014. Personal facilities and credit to the real estate sector are the main drivers behind the growth in total credit, together adding around KWD 551 Mn or around 80% of the total credit growth in Q2-14. Growth rate in Personal Facilities nearly maintained the same level compared to last period to post an increase of 2.8% during Q2-14. As well, credit to real estate sector has jumped by around 3% in Q2-14 as compared to a marginal growth of 0.8% in Q1-14.
Despite the conservative lending policies and low appetite by banks to extend credit, along with the restructuring of corporate debt and the ongoing delay in implementing a dozen of infrastructure and economic projects, the credit market has witnessed signs of recovery in 2013 and Q1-14 that will most likely continue through 2014 driven by the gradual restoration of confidence in the private sector & the recovery of the property market and the local bourse. Kuwait’s broad measure of money supply (M2) increased for the 3rd consecutive quarter in a row, albeit at a decreasing rates, to add around KWD 518 Mn or 1.5% in Q2-14 and to stand at KWD 34.3 Bn as of June-14. The rise in M2 is mainly attributed to the increase in the currency in circulation by 27.2% or KWD 404 Mn.
Saudi
Due to weak oil prices and low demand from OECD, the Saudi Oil Sector GDP reported a quarterly decline of 3.5% at the end of Q2-14 to stand at SAR 322 bn as compared to Q1-14. On the other hand, overall GDP growth for the same period ending June-14 decreased by 3.3%. The non-oil sector GDP contributed to around 54% of the overall GDP, also declining by 3.6% during the same period. Meanwhile, Private sector activity was evident from the robust manufacturing as highlighted by the HSBC PMI index that stood above 58 level for most of 2013/14. The broad measure of money supply (M2) in the Kingdom increased by 2.9% during Q2-14 to reach SAR1,450 bn after growing by 4.8% in Q1-14 driven by ample liquidity with banks and remarkable growth in deposits base and credit facilities.
UAE
UAE’s GDP had already surpassed pre-crisis level by 2011 when it reported a nominal GDP of USD 348.6 billion. According to the revised estimates from the IMF, UAE’s GDP grew by 3.2% during 2013 and is expected to post a stronger growth of 4.1% in 2014. In terms of budget allocations in UAE, the focus continues to remain on developing the non-oil sector in order to counter the expected weakness in the oil sector, which accounted for 1/3rd of the economy’s GDP. The non-oil sector is expected to get further boost from increased investment spending for the World Expo 2020, that will support tourism, hospitality and real estate sectors. Nevertheless, buoyant imports amid the development process would most likely have a negative impact on current account balance, as indicated by the IMF.
Qatar
As economic activity improved, demand for credit facilities in Qatar increased resulting in higher money supply and lending. The private sector continues to account for the lion’s share of lending, however, increased infrastructure investments has resulted in higher lending to the public sector. The country did see delays in project execution that also resulted in cost escalation; however, the government has recently accelerated work on infrastructure projects which will have a similar effect on the pace of credit growth. Qatar’s broad measure of money supply (M2) increased for the 3rd consecutive quarter in a row, albeit at a decreasing rates, to add around QAR 734 Mn or 0.15% in Q2-14 and to stand at QAR 484 Bn as of June-14. The rise in M2 is mainly attributed to the increase in the demand deposit by 8.3% or QAR 8.99 Bn.
Bahrain
Bahrain is expected to post above average growth in real GDP of 4.69% for 2014 as compared to other GCC economies. GDP during the second quarter of 2014 increased to BHD 3.2 Bn, a strong Q-o-Q growth of 4.12% as compared to BHD 3.1 Bn seen during the first quarter of the year. Further, both the components of the GDP, i.e. the oil and the non-oil sector, witnessed strong improvement during the quarter. Oil GDP improved by a strong 7.9% from BHD 796.7 Mn during Q1-14 to BHD 859.7 Mn during Q2-14.
Oman
Oman’s finances further strengthened during the second quarter of 2014 as it reported higher quarterly revenues of OMR 4.0 Bn as compared to OMR 3.2 Bn during Q1-14, an significant growth of 23.8%. However, the increase in expenditure was even higher at 31.6% as it increased from OMR 3.0 Bn to OMR 3.9 Bn, offsetting most of the growth in revenues. The steep increase in expenditure also affected quarterly fiscal surplus that declined by 83.9% Q-o-Q to OMR 34.7 Mn as of Q2-14 as compared to OMR 215.4 Mn at the end of Q1-14.
Source:
Press Release
