GCC: Key Themes For 2014
BMI View: We retain a generally positive view of the GCC's prospects as we h e ad into 2014. While headline growth should slow on account mainly of smaller gains in oil production, the expansion of the non-oil private sector will remain robust. We highlight several themes that will define the region over the coming year , including declining fiscal surpluses; rising rental inflation; continuing diversification; limited increases to private sector employment; and political risks linked to succession issues and sectarianism .
Our macroeconomic outlook for the six economies of the Gulf Cooperation Council (GCC) remains generall y positive as we head into 2014. As has been the case over the past few years, we expect growth in the non-oil private sector to be sustained by low interest rates, large pipelines of public capital infrastructure projects, and rising household incomes . Continued progress in government-driven development plans will support construction and investment activity in most countries, while the prospects for the retail and services sectors remain bright. We have stayed bullish over the more liquid equity markets in the region throughout 2013, and expect this view to hold over the coming quarters (see 'Regional Equity Strategy', August 28) .
That said, headline growth is likely to slow for the GCC as a whole in 2014, on the back of smaller gains in oil production and a mild cyclical deceleration in the non-oil sector following three years of above- average economic expansion . Overall real GDP growth for the GCC is expected to fall to 3.7% - down from an estimated 4.1% this year and 5.2% in 2012 . We forecast Qatar to remain the fastest-growing country for the ninth year in a row (4.8%), followed by Saudi Arabia (4.3%), Oman (3.5%), the UAE and Bahrain (3.4% each), and Kuwait in last place (2.9%). While by no means modest, these rates mark a continued decline in growth after the hectic pace of the mid-2000s, when the hydrocarbon sector was expanding at full steam.
|Growth Rates Slowing Down...|
|GCC - Real GDP Growth, % (Brackets Refer To GCC Average)|