Chief economist predicts the region’s growth will drop to 4.6% in 2013

Average economic growth in the Gulf Cooperation Council (GCC) region is expected to slow to 4.6% in 2013, from 6% in 2012.

This slowdown comes on the back of strong oil-driven growth in previous years.

Qatar and Saudi Arabia will top the region’s growth at 5.4% and 5.2%, respectively.

These are the forecasts of Emirates NBD head of research and chief economist Tim Fox, who gave an overview of the GCC and Middle East and North Africa (MENA) region economies at the Multaqa 2013 conference held in Doha this week.

Fox said that the GCC/MENA region would be the third-strongest growing economy after developing Asia and Sub-Saharan Africa.

Speaking on the growth drivers, Fox said: “Government spending in Saudi Arabia, Qatar and Oman will support both consumption and investment. Saudi Arabia is to spend SAR1.0trn ($266.65bn) in 2013, up 15% from 2012.”

Oil prices are expected to decline to an average $103 per barrel in 2013 from an average of $109 per barrel in 2012.

“Lower oil prices will not have a direct impact on real growth, but can affect output and influence government spending,” Fox said.

He also pointed out that budget surpluses are expected to decline as oil prices ease and spending rises in 2013.

“Higher budget spending increases the vulnerability to a positive oil price shock. However, accumulated savings will provide a cushion,” he said.

Inflation in the GCC is also expected to increase – to 3.7% in 2013, from 3% in 2012 – reflecting higher domestic demand.

Fox also said that the eurozone crises may not have a direct impact on the GCC as Europe accounts for a small proportion – less than 20% – of total international trade for the GCC countries.

“Rising geopolitical tensions remain the key risk,” he said.