The upgraded growth forecast by the IMF for the Middle East next year is further evidence of the region's strength, according to Dr Zakaria Hejres, the deputy chief executive of Bahrain's economic development board. It reinforced the region's vital role in relaunching global growth and the opportunities it offered for foreign direct investment, he said.
The IMF has raised next year's growth estimate for the region to 4.2 per cent, from 3.7 per cent in July, and to 4.8 per cent by 2014. "The Middle East still enjoys enviable rates of growth and as an economic powerhouse in its own right offers vast opportunities for foreign investment," Dr Hejres said. "The Gulf itself is a single market approaching US$1 trillion [Dh3.67tn] in terms of GDP - the equivalent of India. People are now talking about China, India and the Gulf."
However, two of the regions largest economies - Saudi Arabia and the UAE - are forecast to contract this year due to reduced oil production, a fall in crude prices and the collapse of property markets. Saudi Arabian GDP will fall by 1 per cent and the UAE's economy will decline by 0.5 per cent, according to a revised forecast by Standard Chartered Bank. The bank had previously predicted both economies to grow by similar percentage.
"Saudi Arabia has taken the brunt of a fall in oil prices and OPEC oil production cuts, and is more severely hit. The UAE, on the other hand, has fared relatively better," said Philippe Dauba-Pantanacce, the senior economist for the Middle East and North Africa for Standard Chartered. "In our opinion, the property market in the UAE has now bottomed out and we may see some growth in the second quarter of next year. However, it will all depend on availability of credit to new buyers and migration flow to and from the country," he said.
"Currently, prices for apartments are flattening out and in the villa segment it is actually increasing, but fresh supply could have a negative impact." According to the bank, credit markets in the UAE are still constrained due to a loan-to-value ratio of more than 100 per cent, and credit is not as easily available despite falling interbank rates. "In Saudi, the ratio is lower than 100 per cent, but the market there is suffering due to lack of confidence," Mr Dauba-Pantanacce said, adding a major push to diversify economies from oil, a drop in inflation and recovery in crude prices would help the region rebound faster.