Page last updated at 11:03 GMT, Monday, 9 February 2009

Gulf states to see fall in growth

oil refinery
Oil is a major contributor to Gulf Arab states' GDP

Gulf Arab states will see growth plummet this year as lower oil exports and falling oil prices take their toll, says the International Monetary Fund.

Economic growth for the region will be about 3.5%, down from the 6.8% real GDP growth in 2008, said IMF Middle East department chief Masood Ahmed.

Several analysts have already cut their Gulf growth forecasts as the price of oil continues to tumble.

The drop in oil exports will translate to some $300bn (202.1bn) less revenue.

"Collapse in confidence"

Saudi Arabia and its neighbours are now expected to record fiscal deficits of up to 3.1% of GDP, according to the IMF, a marked decline from surpluses of 22.8% of GDP in 2008.

"There has been an extraordinary collapse in confidence," said Mr Ahmed, speaking at an IMF economic conference on Sunday.

"Everybody is holding back in making decisions about spending. The global slowdown will clearly have a significant impact on growth through lower exports, tourism, remittances and higher cost of credit."

Meanwhile, Dubai's chief economist Raed Safadi forecast the country's economy would grow "slightly less" than 2.5% in 2009, on the basis that oil would be about $48 a barrel. Oil contributes some 3% to 4% to the country's GDP, but prices have plummeted considerably since touching a $147-a-barrel high in July 2008.

A rapid deceleration in the country's property sector activity is also adding to oil worries. The falling rate of construction has triggered a slew of job cuts and stoked fears that banks could suffer from defaults on mortgage repayments.


In Egypt, the situation is looking equally bleak. On Sunday, Egypt's finance minister, Youssef Boutros-Ghali, said the most populous Arab country would see a "serious contraction" in economic growth as exports and tourism were buffeted.

"All the interaction with the outside world is coming practically to a standstill," said Mr Boutros-Ghali.

"Our exports are dropping, tourism is dropping, Suez Canal receipts are dropping, [and] workers' remittances are dropping," he added.

In January, Egypt's trade and industry ministry lowered its growth forecast to an annualised rate of below 5.2% in the first half of 2009, because of "sudden variables".

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